Annual Report and Financial Statements

Transcription

1 Annual Report and Financial Statements For the year ended 31 March 2016 Building communities. Transforming lives.

2 Contents 1.0 Strategic Report Page Chief Executive Officer s Review Page Strategy and Business Model Page Principal Risks and Uncertainties Page Financial Review Page Executive Board Biographies Page Directors Report Page Independent Auditors Report Page Consolidated Financial Statements Page Independent Auditors Report Company Page Company Financial Statements Page Directors and Advisors Page 94

3 Mandale Park, Thornaby Leeds PFI Scheme Roman Fields, Peterborough Woolley Wood Development, Sheffield

4 Park Dale, Castleford Keepmoat at a glance New Homes Family, Mandale Park, Thornaby At Keepmoat, we specialise in creating great places for people to live, work and play. We work closely with our partners to create communities not just buildings, and construct homes not just houses. As a leading housing and construction company, we take pride in delivering innovative schemes, developing long-term client partnerships and adding economic and social value to those we work with. Whether we are providing quality new build homes, community regeneration, responsive maintenance and repairs, retirement solutions or sustainability projects, we are committed to offering the best service possible for all our customers across the country Great Britain. Refurbishment We deliver a complete refurbishment offer which breathes new life into tired buildings and neighbourhoods. From retro-fitting tower blocks and converting high-rise offices, to modernising schools, we are delivering programmes involving thousands of properties in local communities and we have a wealth of experience in refurbishment. New build housing Working in close partnership with local authorities and registered providers, we deliver thousands of much needed new homes across the country each year. We specialise in large and small scale mixed use developments, combining a registered provider and private rent, shared ownership and private sale creating truly sustainable communities. Retirement living We develop homes specially created with older people in mind. Our Lifelong homes are tailormade for people considering their housing needs as they get older. We are also a leading provider of specialist housing for the older generation. Our offer includes creating new retirement communities to new build homes for life and refurbishing and remodelling existing buildings that support independent living, including Extra Care schemes. Sustainability We are developing and delivering pioneering sustainability projects across the country, providing a wide range of solutions for both social and private housing that seek to address the challenges of fuel poverty, reducing carbon emissions, creating local jobs and improving the health and wellbeing of occupants. From creating zero carbon new homes to retrofitting high-rise residential accommodation, we also specialise in delivering insulation of all types to hard-to-treat properties, high efficient heating solutions and offering energy advice and facilitating behavioural change. Repairs and maintenance Quality repairs and maintenance services are required to sustain the communities in which we work. We specialise in working in occupied properties and provide a comprehensive service to clients and local residents nationally, which includes responsive repairs with a call centre provision, facilities management and planned/cyclical maintenance, gas servicing and maintenance, and void property solutions. New homes We are a market leader in delivering high quality homes, in areas benefiting from housing-led urban regeneration. Our properties include two, three and four bedroom homes which are for sale on the open market to first and second time buyers, and investors. Our experience spans all aspects of the development process, including community consultation and masterplanning, feasibility studies, comprehensive research, liaison with planners and statutory authorities, and bespoke engineering and design solutions. Property Services, Warrington Central Park, Darlington Great Arthur House, City of London Swallowdale, Doncaster

5 Highlights of the year Keepmoat achieved excellent results across the group during FY16, continuing to grow in size and capability. Group Revenue +3.5% FY16: 1,133.5m FY15: 1,094.9m Adjusted EBITDA +4.5% FY16: 66.7m FY15: 63.8m Cash flow available for debt service +12.8% FY16: 54.7m FY15: 48.5m Homes Revenue +28.3% FY16: 336.6m FY15: 262.4m Contribution +20.3% FY16: 52.2m FY15: 43.4m New build homes delivered (number of plots) +13.3% FY16: 2,416 FY15: 2,133 Average selling price +13.3% FY16: 139,000 FY15: 123,000 Regen Revenue -3.6% FY16: 802.7m FY15: 832.4m Contribution -6.2% FY16: 79.1m FY15: 84.3m Pipeline 1,054m FY15: 1,142m

6 1.0 Strategic Report 1.1 Chief Executive Officer s Review Keepmoat.com 4 Well positioned for growth Keepmoat Limited ( Keepmoat, Group, Company ) is a leading partnership housebuilder and the leading provider of regeneration services in Great Britain. We design, build, refurbish and regenerate places where people want to live and operate in a diverse range of markets and sectors including community regeneration, refurbishment, repairs and maintenance and housing development. In the financial year ended 31 March 2016, the Group performed in line with expectations in the face of significant shifts in government policy and continued strong demand for new housing. Good progress is being made in developing growth opportunities in new markets and sectors. Group revenue +3.5% in the period to 1,134m Group revenue increased by 3.5% to 1,134m (FY15: 1,095m) reflecting strong growth in our Homes division offset by a small decline in Regeneration division revenue. Adjusted EBITDA of 66.7m (FY15: 63.8m) continues to demonstrate progress, increasing by 4.5%. Changing government priorities resulting in changing market Following the general election in May 2015, the new government proposed a series of significant housing and planning policy changes that have far-reaching consequences for our local authority and housing association partners. At the heart of these changes is a drive to meet the substantial demand for housing by building more homes, more quickly, whilst still constraining public expenditure. Reductions in central government funding mean local authorities are continuing to face significant financial pressures. Centrally imposed caps on rents charged for social housing are impacting upon capacity to build new housing or maintain, repair and refurbish existing stock. As a result of these factors, some housing associations are now merging or creating new delivery models to support their strategies. Many policy details will not be finalised until the regulations are published which provide the details that underpin the Planning and Housing Bill. However, the Bill does pave the way for significantly more public land becoming available, particularly brownfield land. Finally, as a result of the vote by the UK to leave the European Community, we are seeing a period of greater uncertainty. It is too early to have any definitive understanding about the impact of this decision, but the ongoing high demand for new homes for sale or rent, gives us confidence that we are well positioned within our existing markets and that we have the capabilities to expand into new markets Keepmoat s extensive experience of working in long-standing partnerships combines with our deep expertise in transforming brownfield sites into thriving communities, using a broad range of construction technologies. More than 70% of our homes sales are to first time buyers, which makes us one of the country s most experienced organisations when it comes to serving the particular needs of first time buyers. As a consequence of all these skills and capabilities, we are engaging in dialogue with existing and potential partners (both public and private sector) in order to deliver new and innovative approaches to building more homes across a full range of tenures, from private sale and rent, to shared ownership and Starter Homes. More than 70% of our homes sales are to first time buyers, which makes us one of the country s most experienced organisations when it comes to serving the particular needs of first time buyers.

7 Keepmoat.com 5 Complementary capabilities and relationships driving opportunities and growth Keepmoat s growth is not only driven by the state of the economy and demand for better housing, but also by our ability to combine the skills required to bring to life our customers plans and aspirations. We operate across all aspects of the housing cycle from finance, design and planning, to developing and building, selling, maintaining, repairing and retrofitting. As a national company with deep local knowledge and long-term customer relationships, we are able to combine our capabilities with those of our extensive supply chain to deliver programmes for our clients that go beyond bricks and mortar and enhance local economies and communities by employing local firms and creating local jobs. Our longstanding commitment to partnership working, alongside the strength and depth of our supply chain, is a key strength together with our capabilities in design, construction and project management which deliver high quality homes and communities. Our pipeline of contracts with housing associations and local authorities provides Keepmoat with a stable platform from which to deliver further refurbishment and regeneration programmes and generates cash inflows to invest in our Homes division. Our partnership teams continue to engage housing clients and landowners to identify more locations where housing-led development can help meet demand and our land bank remains strong; a testament to the skills and dedication of our teams. Progress in entering new geographies and sectors During the year, we continued to build our presence in new geographies and develop propositions for new sectors which will fuel further growth in the future. The South of England is a key market for estate refurbishment, community regeneration and new housing. In 2014, we launched a new Homes region in the South and homes sales grew to 229 in the year to 31 March 2016 (FY15: 62 plots) fuelled by developments in Peterborough and Cambridge. During the year to 31 March 2016, we also established a new Homes region in Scotland. A delivery team and land pipeline has been established with the region preparing for the first home sales during the year to 31 March 2017, supporting continued growth of the Homes division into the new financial year. We are developing positions in two new sectors, enabled by our partnership capabilities, extensive local relationships, strong supply chain and quality construction. The demand for quality private rented homes is increasing and financial institutions are keen to invest in this long-term revenue stream. We are developing relationships with a number of investing institutions who are seeking to work in partnership with a development partner as they seek to build significant portfolios of private rented homes. In addition, there is substantial demand by retired people for homes and communities designed with their particular needs in mind. We are developing proposals to expand our experience in the Extra Care market to this broader sector. These additional sectors create opportunity for future growth for the Regeneration division. As a national company with deep local knowledge and long-term customer relationships, we are able to combine our capabilities with those of our extensive supply chain to deliver programmes for our clients that go beyond bricks and mortar. Cutlers View, Sheffield Yew Gardens, Doncaster Regeneration Project, Southwark

8 1.0 Strategic Report 1.1 Chief Executive Officer s Review Keepmoat.com 6 Homes strong growth and new geographies Revenue in the Homes division increased by 28.3% in the year to 336.6m (FY15: 262.4m). The growth arises from a 13.3% increase in the number of plots sold in the year to 2,416 plots (FY15: 2,133 plots) and an increase in the average selling price per plot which increased to 139,000 (FY15: 123,000). Revenue for Homes division +28.3% in the period to 336.6m (FY15: 262.4m) Contribution increased to 52.2m (FY15: 43.4m) with contribution margin decreasing slightly to 15.5% (FY15: 16.5%) as cost pressures impacted at a greater rate than selling price increases. Revenue growth has been delivered across all regions of the Homes division, and the new South region is now firmly established, delivering 229 plots in the year (FY15: 62 plots). Our Homes division continues to grow strongly, with consumers increasing demand for quality housing being supported by low interest rates and programmes such as Help to Buy. More than 70% of Keepmoat s private sales are to first time buyers, with 66% of sales supported by the Help to Buy programme. The Scotland region was established in the current financial year, although the first plot sales will only be delivered during the year ending 31 March In anticipation of further growth next year and beyond, our two largest Homes regions, Yorkshire and Midlands, have been split into two sub-regions with new regional offices established in Leeds and Nottingham. Increasing supply of land To enable more homes to be built, we have continued our programme of working in close partnership with local authorities, housing associations and other landowners to identify plots of land that could be suitable for housing. It can take many years to develop proposals that make financial sense for the landowner, meet local planning requirements, are relevant for the local market and have cleared all planning requirements before building work can actually start. As we increase our volume of building we risk depleting our pool of land that has development potential and quickly replenishing that pool provides forward visibility and confidence that our national and local supply chain requires. At 31 March 2016, the number of plots within the land bank increased by 14.5% to 18,437 (FY15: 16,106) representing 7.6 years of work ahead based on current build rates (FY15: 7.6 years). Our progress in Homes means that we are now the 10th largest housebuilder in the country, and our distinctive model means we are an attractive partner for local authorities, housing associations and other owners of public land. We await with interest how the proposed Starter Homes initiative will be introduced by central government, and implemented by local planners. Revenue growth has been delivered across all regions of the Homes division, and the new South region is now firmly established, delivering 229 plots in the year (FY15: 62 plots). Wall Cavity Insulation, London Extra Care, Jazz Court, Scarborough The Old Orchard, Stanford-le-Hope

9 Keepmoat.com 7 Regeneration broad and deep capabilities supporting extensive partnership base A combination of project cancellations and deferrals, following the implementation of the rent cap on housing associations and terminating a small number of loss making contracts through the year, resulted in revenue for the Regeneration division reducing by 3.6% in the year to 802.7m (FY15: 832.4m). Revenue for Regeneration division ( m) -3.6% in the period to 802.7m (FY15: 832.4m) Contribution declined by 5.2m during the year to 79.1m (FY15: 84.3m). Strong performances in a number of regions (and in spite of the revenue declines noted above) were offset by a number of poorly performing contracts across our reactive maintenance business and the South region. As a result, the reactive maintenance business was significantly restructured during the year, resulting in the renegotiation of a number of contracts and the termination of others. Looking into the next financial year, and in light of new government policies, local authorities have been facing greater levels of financial constraints with imposed rent reductions, gradual curtailment of central government funding and new planning requirements. We anticipate this will continue pressure on maintenance, repair and refurbishment budgets. However, pressure for more housing is expected to result in estate regeneration where the quality of existing homes and communities can be improved whilst increasing housing density. These programmes are expected to be funded through income generated from private home sales. Housing associations face rent controls but are being strongly encouraged by central government to increase the number of homes for rent, funded by a combination of sizeable financial surpluses and through selling homes for private sale. These changes are reflected in the mix of work in the pipeline with new build housing taking a greater share of the pipeline than equivalent levels in previous years. In the South region, a small number of long-standing challenging new build contracts have disproportionately acted as a drag on profitability in the region. These contracts have largely completed in the year. Woolley Wood Development, Sheffield Acorn Park, Accrington Leeds PFI Scheme

10 1.0 Strategic Report 1.1 Chief Executive Officer s Review Keepmoat.com 8 Enhancing the efficiency and effectiveness of our group Clients and customers are demanding more new homes, regenerated communities and refurbished estates, at the right quality and at a price that can be afforded. We continuously strive to identify ever more efficient and effective ways to operate, and focus on ensuring our workforce, supply chain, capabilities and relationships are fit for the future. Procurement By sharing best practice and identifying new best practice, we can continue to meet the demands of our clients and customers and counter the impacts of rising costs in the supply chain. Central to this is ensuring effective procurement processes and contracts are in place across the group, supporting local delivery. Developing and expanding a skilled workforce Demonstrating Keepmoat s commitment to developing the sector s skills, 9% of the workforce are trainees, apprentices or graduates. We will continue to need more young people to enter the sector and so we are now extending our expertise in this area into our supply chain so our suppliers can increase the number of new employees in the sector. Building our supply chain capacity to deliver Our supply chain is fundamental to our capability of delivering efficient projects and increased demand for housing is leading to higher labour and materials costs and constrained supply. As we grow and develop into new sectors and geographies, our supply chain must grow and develop with us. Through outreach programmes we continue to identify suppliers with the necessary skills and capabilities to support us. Our materials supply chain is robust, with national providers where most appropriate, and we continue to invest in shaping a larger, skilled workforce. Speeding up delivery of new homes Britain needs more homes, more quickly. To support the country s capacity for growth we are actively investigating the potential of new construction techniques to help us build more homes, more quickly including off-site construction, where standard elements of the building process is done in a controlled factory environment. We already have extensive experience in timber-frame construction, which is increasingly of interest to clients as a means to create quality homes, quickly. Increasingly, clients and suppliers will have to work together to meet the market demand and so in addition to traditional industry research and development, we are also working closely with clients and industry bodies such as the new Housing Finance Institute. By sharing our experiences of working in successful partnerships, more organisations will be able to deliver more programmes. Our people Our business is only as strong as the individuals who deliver its services. As the Group grows, we continue to invest in our people whether as trainees, apprentices, graduates or those who join us with many years of industry experience. We continue to rely on the drive and ambition of all employees throughout the UK, and thank them for their continued dedication. As a large organisation we also know the value and importance of effective leaders. Our behaviour as leaders causes things to happen, positive and negative. We have developed a new leadership behavioural framework that helps our leaders understand what is expected from them, and we are embedding this framework into our personal development and review process. Leadership In light of the potential for Keepmoat to grow by developing new markets and partnerships, I am pleased to report that we have strengthened the executive team with the appointment of Ben Denton as the Group Director of Strategy and Business Development. In the period, Regeneration Director Mark Cutler left the business. Outlook Keepmoat is different to a traditional builder or developer because of its deep experience of working in partnerships, broad and deep capabilities, focus on creating homes for younger and older people, commitment to communities and public service ethos which reflects our client base of government bodies and housing associations. This difference is key to continued strong growth in our Homes business, ongoing progress in regeneration markets and the development of exciting new markets driven by a growing population, need for more, quality, housing at the right price, and the opportunity to enhance local economies by regenerating neighbourhoods and communities. Although our markets vary significantly in different parts of the country, the overall market position remains strong. We have positioned ourselves to take advantage of existing growth opportunities and the new opportunities that will arise from the Planning and Housing Bill and look forward to delivering further progress in the next financial year. Dave Sheridan Keepmoat Group Chief Executive Officer 9% of the workforce are trainees, apprentices or graduates.

11 Evergreen, Doncaster Keepmoat.com 9 Woolley Wood Development, Sheffield Leeds PFI Scheme New Home Owner, Evergreen, Doncaster Happy Tenants, Leeds PFI Scheme Towneley Gardens, Burnley

12 1.0 Strategic Report 1.2 Strategy and Business Model Keepmoat.com 10 Our Strategy and Business Model Great Britain needs more homes for people to live in, and better quality housing. That s why Keepmoat is here. We are a fast growing top 10 UK housebuilder and the leading provider of regeneration services. We design, finance, build, refurbish and regenerate places where people want to live. Our skills and capabilities are comprehensive. We operate across all aspects of the housing cycle from finance, design and planning, to developing and building, selling, maintaining, repairing and retrofitting. Our Vision, Mission and Values shape our strategy and the way we work, and mean we are a different type of housing and construction company. Our corporate strengths include our local knowledge, long term customer relationships, breadth of capabilities, integrated offering, national and local presence, supply chain and our ability to enhance local economies by employing local firms and creating local jobs. Vision: Building communities. Transforming lives This means that we think and act beyond bricks and mortar. As well as creating better places for people to live, we know that our success depends on us playing our part in building the strong communities our clients and customers want. We work for our clients to design, build, finance, refurbish and regenerate places to improve economic and social outcomes for local citizens. We focus on improving the communities we work in and the people we serve, creating significant local economic benefits through our supply chain and local employment. 9% of our workforce are trainees, apprentices and graduates. Mission: We are committed to building long-term partnerships to deliver high-quality community regeneration solutions Our Mission explains how we are very different from a traditional housebuilder. It s in what we do, and how we do it. We create long-term partnerships with large organisations who have unused land or properties. Together we build attractive, affordable and high quality homes and communities that people want. We bring finance alongside design, planning, construction and community engagement skills to help clients achieve their ambitions. We nurture an extensive, and growing, supply chain of small and medium sized companies that support us around the country and make that supply chain available to our public and private sector partners. To date we have experience of over 170 partnerships, delivering thousands of new and improved homes. All this investment and participation helps transform neighbourhoods and improve the lives of local people of all generations. Those benefits appear in the homes and communities we improve, create and maintain; in the new jobs and training opportunities we create; and in the local businesses we engage. Values: Straightforward, Passionate, Collaborative and Creative Our values support the vision, shape the culture and reflect how we work and behave. Straightforward: We get the job done in the most efficient way. We are friendly, open and honest. In other words, the people you would trust on any project, large or small. Passionate: We care about what we do. We put pride and energy into delivering results. We give the best, so more people can enjoy living in safe, happy communities and homes. Collaborative: We work together in partnership to deliver the very best customer experience. By sharing our expertise, we can build the very best. Creative: We are proactive, flexible and resourceful. We listen, learn and deliver solutions. We bring finance alongside design, planning, construction and community engagement skills to help clients achieve their ambitions.

13 Keepmoat.com 11 Essentials Our Essentials are the five basic building blocks of our business. Safety: The safety of people, partners and communities is at the heart of everything we do. Quality: We work to exceed our clients expectations of our service, product and delivery. Customer: We focus on delighting our customer. People: Our people are the heart of our business, providing a service we are proud of. Sustainability: We protect the environment, act ethically and leave a positive legacy. Medium term strategy We know our government and registered provider clients are under significant pressures in two broad areas; firstly, to build more homes, more quickly and more cost effectively; and secondly to improve and maintain homes more efficiently than ever before. Our strategy is quite simply to grow strongly by delivering more for our clients and customers whilst maintaining our customary high standards. We will achieve this by building stronger relationships and partnerships with existing clients, developing skills and capabilities to build greater volumes of quality homes more quickly, expanding into new sectors and regions, such as the private rental sector and the South of England without any compromise on the product that our customers have come to expect. The breadth and depth of our skills and capabilities mean we can help our clients and partners achieve their goals in refurbishment, regeneration, new build, maintenance and repairs. Increasingly, our clients want to access capabilities from across our business, get our help with funding and access our supply chain to help them deliver projects. We also know there is huge, pent-up, demand from consumers for quality homes, in the right location at an affordable price. We believe that this demand will support substantial growth of our Homes division over the next few years. Further revenue opportunities are expected to develop from new markets, such as building homes for retirement living and in the private rental sector. In addition to this, we will continue to address existing markets such as providing new school buildings, energy efficiency installations and low carbon power technologies, adapting to the changing needs of our clients. Making the most of our strengths The Group s existing strengths support our growth ambitions: National scale, local understanding. Keepmoat has successfully grown into a large national business with deep local roots and we intend to maintain that national and local approach. Develop our comprehensive offer. We have a broad set of skills ranging from developing partnerships with landowners, establishing supply chains, building houses and flats, converting buildings, maintenance and refurbishment, and large scale regeneration. Our customers often need several of these capabilities and so we are increasingly collaborating internally, to the benefit of our clients. Organic growth. In the next five years we intend to double the number of new houses we build for sale or rent from 4,500 to 9,000 per year a major contribution to meeting the country s housing needs. We want to build more and faster. In addition, the continued need to maintain and improve housing means we will seek more opportunities to refurbish more homes, improve their energy efficiency so they are warmer, healthier and cost less to run. Market and sector expansion. The need for more housing means we can bring our distinct approach to new markets: Grow our core. Our core markets will remain first time buyers for new homes, local authorities and housing associations for maintenance, repair, refurbish and regeneration programmes. We will continue to build our presence in these markets. Enter new geographies: We will expand our offer deeper into Scotland, Wales and the South of England, where we have traditionally had either little presence or been wholly focused on housing repair and refurbishment. Enter new sectors. We will enter new markets, so more housing opportunities will be created. We will expand our home offer for older people into the Retirement Living market, where there is a significant need for homes designed for older people as their needs change over time. Also, we will create partnerships with financial organisations and use our skills and capabilities to create thousands of new homes in the private rental sector. In the next few years we intend to double the number of new houses we build for sale or rent from 4,500 to 9,000 per year a major contribution to meeting the country s housing needs.

14 1.0 Strategic Report 1.2 Strategy and Business Model Keepmoat.com 12 Leveraging our scale. We have grown mostly by financing and delivering small and medium sized housing programmes, whether homes for sale, new build for rent, refurbishing estates or implementing repair and maintenance programmes. Now, our national scale and financial strength together with the breadth of our experience, and depth of our skills and capabilities means we can compete to deliver a greater number of larger programmes and partnerships. Shape more partnerships. At the heart of our growth will be deeper and broader partnerships with existing and new clients. That requires us to understand clients challenges and objectives, and develop ways to help them meet their goals whether economic growth; social tackling deprivation, improving health; environmental reducing carbon consumption; financial reducing operating costs; operational improving customer service or strategic developing their housing portfolios. Efficiency and effectiveness. As we grow bigger, we risk becoming less agile. We want the best of both worlds being local and agile, almost like a small business can be. But we also want the benefits of being a large business such as professional rigour, quality, efficiency and effectiveness in winning and delivering work. That means we share what works well, and avoid duplication and unnecessary spend, as our customers expect. Building our Brand. To build, maintain, repair and regenerate more homes we will need more people to choose to work for us as employees or with us as suppliers, partners and clients. That means we need to be better understood. Our audiences need to know what we do, how we do it and why we are both different, and better, than the competition. We need to further build our reputation and ensure that we understand our audiences concerns. Markets and trends Keepmoat is a leading housing and construction company and operates in a range of sectors in Great Britain. Each sector demonstrates its own specific characteristics and trends but all of our sectors are dynamic influenced by consumer demand, local and national housing policy, the drive to increase efficiency in public spending, ambitions to boost the economy and population growth. Against a backdrop of sustained underinvestment over many decades, there is a significant shortfall in the supply of homes for all lifestages from first time buyers to retirement living and demand outstrips supply. And statistics demonstrate the scale of the challenge facing the sector, and the size of the opportunity. Planning In the first quarter of 2016, the number of planning permissions granted by local authorities reached the highest figure since 2008 and the number of houses being built is also higher now than it has been for many years. (House Builders Federation) New building New building has been at record low levels. In 1970, 378,000 new homes were completed, and by 2014 that figure had plummeted to 141,000. (Office for National Statistics) Retirement housing By 2022, six million people in the UK will be aged 75 years or older. Around one million elderly say they would consider retirement housing, but only 128,000 have been built for private sale. (NHBC Foundation) Over 181,000 new homes built in 2014/15 up 22% on the previous year. (House Builders Federation) Younger households Over the last 10 years there has been a significant increase in the proportion of younger households (aged 25-34) in the private rented sector, rising from 24% in 2005 to 46% in (DCLG English Housing Survey) 4.1bn funding earmarked by the government to support building 135,000 new shared ownership homes. (Homes and Communities Agency)

15 Keepmoat.com 13 Local and central government are now striving to increase the supply of homes for sale or for rent by private or registered landlords. At the heart of policy changes is a drive from the current Conservative government to get one million homes built by 2020, for more people to become home owners and for more rented accommodation to become available. Within this broad framework, new policies are encouraging new forms of tenure such as Starter Homes (properties for first time buyers sold at a discount), expanding tenures such as shared ownership (where the purchaser buys a share in a property owned by a housing association, starting from 25%, and pay rent on the remainder at an affordable rate) and maintaining existing support such as Help to Buy through which the government provides a loan up to 20% of the purchase price. Community regeneration Some of our core regeneration markets are experiencing a hiatus as local authorities and registered providers grapple with changing policy and a range of complex challenges. Both local authorities and housing associations are looking to go beyond bricks and mortar and are seeking better social and economic outcomes by regenerating entire neighbourhoods and communities attractive communities, where people want to live and work, help local businesses and economies grow further improving people s financial well-being and health. The broader national economic position means that clients are working to achieve these outcomes whilst central government funding is being withdrawn, costs are being cut, taxes increased on local businesses, rental income from affordable housing reduced and the need to maintain, repair and refurbish their existing housing stock continues as before. Housing associations are similarly being pressured by government to increase the number of homes they build whilst having rent reductions imposed upon them. However financially, housing associations are in a different position, having access to their own funding from surpluses or capital markets. A number of the large housing associations are developing plans to significantly increase the number of houses they are building. Many do not have the necessary supply chains or project management expertise to undertake this in-house and will seek external experienced partners. Building homes for private rent As house prices have increased, there is growing demand for properties to rent, particularly in the UK s major cities. Whilst historically, the UK s property rental landscape has been dominated by fragmented private landlords, other countries have developed significant portfolios of rental properties under institutional ownership. Institutional investors are attracted by the long term yields generated from assets which have the potential to appreciate in value. Increasing levels of funding are being made available to support this private rental sector, which is expected to see significant growth over the next few years. New homes for sale The private homebuilding sector is demonstrating high levels of growth in both the number of homes being built and sold, and the number of planning permissions granted. Home ownership aspirations remain strong and home ownership creates positive wealth to the UK economy. Whilst there is greater demand for homes and interest rates remain low, lack of supply is pushing prices beyond the reach of many, and low levels of increase in household income create affordability issues. This has resulted in government support through the Help to Buy and Starter Homes programmes to overcome affordability issues at the lower price end of the market. The UK population is growing and population movement is happening on a greater scale around the South East as people are moving out of London to the surrounding counties where housing is more affordable. Great Britain s population is also ageing, increasing the demand for homes suitable for older people but as described above, this market is seriously underserved. Keepmoat s broad construction skills, its continued focus on community regeneration and particularly its capabilities to partner with public service organisations provides a unique platform to target these developing markets. For Keepmoat whilst each sector and geography faces its own differences and challenges, overall, our markets remain positive for growth. Both local authorities and housing associations are looking to go beyond bricks and mortar and are seeking better social and economic outcomes by regenerating entire neighbourhoods and communities.

16 1.0 Strategic Report 1.2 Strategy and Business Model Keepmoat.com 14 Environmental matters and sustainability Keepmoat continues to remain focused on reducing the impact of our operations on the environment. However, this is only a small part of the improvements that we seek to provide. A significant proportion of the projects we undertake result in legacy environmental benefit. For example: Keepmoat has secured over 150m of investment to tackle fuel poverty. Keepmoat was amongst the first providers to build zero carbon, Code Level 6 homes and passivhaus certified homes in the UK. Keepmoat delivered 3 of the top 4 performing homes in the 17m TSB Retrofit for the Future competition. Over the past ten years Keepmoat has made 350,000 homes warmer through insulation and energy efficiency measures, saving households across Britain more than 160m on their energy bills. Our people It is our people that give us our competitive and quality advantage and we are very proud of our skilled, dedicated and motivated colleagues who work to the highest standards and make the business succeed. After further growth in the industry, we are seeing increased demand for talent and we are taking the necessary steps to ensure that we attract, recruit and retain employees and provide training at all levels. We actively involve our employees in decision-making across the business by a range of mechanisms including our employee forum and road shows to help employees influence the shape of the future business. The Group is committed to achieving a balanced and diverse workforce and pursues an equal opportunities policy through all areas including recruitment and selection, training and development, performance reviews, succession planning and promotion, and ultimately retirement. It is our policy to ensure all employee related decisions are made on the basis of merit and capability regardless of religion, race, nationality, ethnic origin, gender, sexual orientation, marital status, age or disability. Keepmoat is committed to upholding basic human rights within its business. The Group generates all its revenue from UK operations and its supply chain is sourced from within the UK. As such our supplier accreditation processes ensure we comply with national regulations and legislation. Applications from disabled persons are always fully considered, bearing in mind the abilities of the applicant concerned. Where existing employees become disabled, every effort is made to ensure continuity of employment, actively looking to adjust their environment where practicable, and providing training and career development to allow them to maximise their potential. Health and safety Construction and housing work has inherent risks for our employees, residents we serve and members of the public near to where we operate, and so Health and Safety is inherent in the way we work. We are committed to providing a safe working environment and in the last year, we have continued to focus on our strategy that encompasses what we call the 6 C s: Control, Competency, Communication, Culture, Coaching and Compliance. The behavioural safety programme developed for Keepmoat is called Safe2Go and it goes beyond training, requiring employees at all levels to reinforce the programme and the behavioural traits. Bringing safety to life in this way helps senior management remain connected to what we mean when we say we want everyone to go home safe every day. Ongoing and new initiatives have included: Comprehensive training programmes supporting frontline employees in doing their daily work safely. Campaigns covering Dust, Asbestos, Scaffolding and Temporary Works, engaging with employees at all levels of the supply chain to engender the right behaviours and improve performance in these risk areas. Targeted initiatives for near miss reporting (See It Sort It Report It) and safety around plant on site (Thumbs Up). Effective data capture helps with identifying trends and underlying causes and we have introduced a new system called SPARK which is providing more consistent data. Keepmoat use both lead and lag indicators; the essential key performance indicators that we focus on are: Proactive safety measures including Director visits, Guidance and Observation (GO) visits and monthly safety briefings. Accident Frequency Rate (AFR), reflecting the number of reportable accidents over the average hours worked by employees and contractors. Accident Incident Rate (AIR), reflecting the number of reportable incidents over the average number of employees and contractors. After several years of continual reduction in reportable incidents, the rate of reduction has recently stabilised although our ambition is for the rate of reportable accidents to continue to fall.

17 Keepmoat.com 15 Learning and development Demonstrating Keepmoat s commitment to developing the sector s skills, 9% of our workforce (328 young people) are trainees, apprentices or graduates, demonstrating our commitment to building the workforce of the future. We will continue to need more young people to enter the sector and are developing additional strategies, working alongside our supply chain and industry bodies, to encourage more people to consider building their careers in the housing and construction sector. In addition, we conduct annual employee engagement research across the entire employee base. This data provides insight for teams and management to develop projects and programmes that continuously improve how we work together to build a bigger and better Keepmoat. As part of its commitment to our people, we have been awarded the Investors in People accreditation. Gaining the IIP accreditation is another step to continually improving the service provided to our customers and clients by helping our employees maximise the contribution they can make to the long-term success of our organisation. We actively involve our employees in decision-making across the business by a range of mechanisms including our employee forum and roadshows to help employees influence the shape of the future business. Employee diversity Average number of employees, split by gender, for year ended 31 March 2016: Male Female Total Number % Number % Number % Directors 3 0.1% % All others 2, % % 3, % Total 2, % % 3, % Average number of employees, split by gender, for year ended 31 March 2015: Male Female Total Number % Number % Number % Directors 4 0.1% % All others 2, % % 3, % Total 2, % % 3, %

18 1.0 Strategic Report 1.3 Principal Risks and Uncertainties Keepmoat.com 16 Principal risks and uncertainties This section sets out a description of the principal risks and uncertainties that could have a material impact on the Keepmoat Group strategy, performance, results, financial condition and reputation. Principal risk Context Possible impact Mitigation Government funding risk Material elements of the Group s revenue is secured directly or indirectly from various central and local government funding strategies. Significant policy changes could impact on the sustainability of elements of Keepmoat revenue as sources of funding to support specific project types change. As a result, Keepmoat s sales pipeline is susceptible to changes in government policy. Government policy is routinely monitored and communicated to management. The Group actively participates in industry consultation processes. Strong end-client relationships result in a partnership approach to determining future volumes of work providing high levels of forward visibility of future revenue. Management regularly assess future revenue risk through analysis of their pipeline of future work, and flex the scale of infrastructure accordingly. The scale and diversification of the business removes dependency on any single funding source. UK housing market risk The UK housing market is impacted by consumer demand and employment levels and is dependent on the availability of mortgage finance. Government incentives, such as the Help to Buy scheme, have helped to stimulate consumer demand. Changes in government support could have an adverse impact on plot sales and profitability. A general decline in confidence in the housing market could reduce the demand for Keepmoat-built homes. Lender restrictions on mortgage availability could reduce the ability of home buyers to buy Keepmoat homes. Keepmoat Homes works closely with mortgage providers who support lending products targeted at our product mix to ensure risks are identified before they impact upon sale of homes. Government policy amendments and statements are closely monitored alongside market statistics and trends to enable management to react to changes in economic conditions. Keepmoat Homes capitallight business model helps to insulate the Group from market risk as lower levels of forwardinvestment are made in land assets. Health and safety risk The safety and well-being of Keepmoat s employees, subcontractors and members of the public is of critical importance to the Group. Inadequate health and safety procedures could lead to injury or death, operational failure and possible significant compensation payments and fines. The Group has implemented a comprehensive safety strategy, which includes bringing safety to the forefront of our culture, measuring safety performance, strong risk management procedures and audits of compliance with these procedures.

19 Keepmoat.com 17 Principal risk Context Possible impact Mitigation Commercial risk The Group enters into contracts for the delivery of high value projects, through which it inherits certain elements of risk for non-delivery under those contracts. A failure to adequately control project delivery could result in the Group failing to satisfy contractual commitments, or incurring greater project costs in the delivery of the projects. The Group operates clear and robust contract bidding and authorisation processes. Approval authority limits require higher risk and higher value projects to be subject to greater levels of review and assessment before any contractual commitment is made. The Group undertakes routine and structured contract performance reviews, identifying risk and amending the project delivery programme accordingly. Project delivery is dependent upon sub-contractors and material suppliers. Poor or late availability of labour and materials could significantly impact upon the Group s ability to operate efficiently and deliver projects on time with high levels of client satisfaction. The Group maintains strategic supply agreements with major materials suppliers and project scheduling permits material orders to be raised with appropriate lead times for delivery without impacting upon overall project timescales. A broad sub-contractor base delivers services across the Group, with no dependence upon any single subcontractor in any region. The Group relies on surety companies to provide performance bonds on certain contracts. If the Group were unable to provide appropriate levels of performance bond coverage, it may be unable to compete effectively for new work. The Group has established strong relationships with providers of surety products and has established suitable bonding facilities in order to support the Group s requirements for the foreseeable future. Financial irregularity risk and liquidity risk The cash flow requirements of the Group s contracts can be very different and availability of short-term liquidity is critical to the Group s ability to grow and deliver successful projects on behalf of clients. A lack of short term liquidity could impact upon the Group s ability to invest in land and build WIP in the Homes division, constraining growth, or impacting on the ability to pay sub-contractor and material suppliers resulting in a failure to deliver projects to an acceptable standard and on time in both the Homes and Regeneration division. The Group maintains strong financial discipline. Cash generation and facility headroom is monitored by robust budgeting, forecasting and cash management disciplines. The Group fails to meet agreed bank covenants. In the event that the Group fails to meet its bank covenants, there is a risk that funding facilities are withdrawn. Headroom against bank covenants is monitored by forecasting and stress testing and is routinely reported through monthly Board reports.

20 1.0 Strategic Report 1.4 Financial Review Keepmoat.com 18 Financial review Revenue for the year was 1,133.5m (FY15: 1,094.9m), an increase of 3.5%. Adjusted EBITDA increased by 4.5% to 66.7m (FY15: 63.8m). Operating profit for the year was 61.4m (FY15: 55.9m), an increase of 9.8%. In order to provide clearer visibility of the underlying performance of the Group, the Board elect to measure profits on an adjusted basis alongside other key KPIs as follows: Change Year ended 31 March 2016 Year ended 31 March 2015 % m m Revenue 3.5 1, ,094.9 Adjusted EBITDA Adjusted operating profit Operating cash flow (11.0) Cash flow available for debt servicing and acquisitions Adjusted EBITDA is earnings before interest, tax, depreciation and amortisation and is calculated before exceptional costs and includes unwound NPV provision in relation to shared equity debtors (a reconciliation of operating profit to Adjusted EBITDA is provided in note 2). 2 Adjusted operating profit is stated before exceptional costs and amortisation of intangible assets (a reconciliation of operating profit to Adjusted operating profit is shown on the face of the Consolidated income statement). Cash flow available for debt servicing and acquisitions increased to 54.7m (FY15: 48.5m). Whilst additional cash generation has been delivered in the year from the one-off sale of the Homes shared equity loan receivables book (see note 13), significant investment has been made in land and build work in progress in the Homes division in order to support further growth into the future. These results are underpinned by a set of well-embedded principles in Keepmoat s corporate ethos including prudent management, risk assessment, customer satisfaction, quality of products and services, innovation and continuous improvement. Leeds PFI Scheme Property Services, Oldham Pannel Craft, Birmingham

21 Keepmoat.com 19 Keepmoat Homes Change Year ended 31 March 2016 Year ended 31 March 2015 % m m Revenue Contribution Contribution % 15.5% 16.5% New build homes delivered (number of plots) ,416 2,133 1 Contribution is gross margin, adjusted for the unwinding of the discount on the shared equity loan receivables until disposal (a reconciliation of gross profit to contribution is provided in note 2). Building on performance in previous years, Keepmoat Homes grew significantly and achieved revenue of 336.6m (FY15: 262.4m). The number of home sales increased 13.3% to 2,416, with average selling price increasing by 13% to 139,000 (FY15: 123,000). Contribution increased by 20.3% to 52.2m (FY15: 43.4m) as a result of the increased volume. Contribution margin reduced slightly to 15.5% (FY15: 16.5%) as cost pressures impacted at a higher rate than selling price increases. Keepmoat Regeneration Change Year ended 31 March 2016 Year ended 31 March 2015 % m m Revenue (3.6) Contribution 1 (6.2) Contribution % 9.9% 10.1% Regeneration order book (7.7) 1,054 1,142 1 Contribution is gross margin. Keepmoat Regeneration revenues declined slightly in the year to 802.7m (FY15: 832.4m), with the decline largely reflecting the reduction in revenues from Keepmoat Property Services as the division withdrew from a number of underperforming contracts. This division was restructured during the year aligning responsibility for reactive maintenance services on a geographical basis alongside the significantly larger planned maintenance services. Contribution margin declined to 9.9% in the year (FY15: 10.1%) as poor performance of the Keepmoat Property Services division combined with underperformance on a small number of new build contracts in the Southern region. These contracts are largely complete and this drag on profitability is not expected to continue into the new financial year. The Regeneration order book has fallen by 7.7% to 1,054m (FY15: 1,142m), which partially reflects being a year further through the large Leeds and Pendleton PFI contracts (and hence a year less trading remains in the order book).

22 1.0 Strategic Report 1.4 Financial Review Keepmoat.com 20 Exceptional items The exceptional charges of 2.3m in the year arise in a number of areas and reflect the net position of exceptional costs incurred and an exceptional gain. On 12 August 2015, the Group sold its entire shared equity debtor book for consideration of 19.7m, resulting in an exceptional loss on sale of 3.2m (including disposal costs). As noted above, the Group restructured certain elements of the Regeneration division during the year incurring 2.1m of cost in relation to redundancies and costs of vacating certain properties. Offsetting these exceptional costs is an exceptional gain of 3.0m arising on the sale and leaseback of the Group s headquarters in Doncaster. Financing costs External financing income in the year was 0.2m (FY15: 1.1m). The annual charge includes non-cash amounts of 0.3m in respect of unwinding of amortisation of arrangement fees incurred in FY15. Taxation The current year tax credit of 0.6m (FY15: charge of 12.9m) is made up of a current tax credit of 1.6m and a deferred tax charge of 1.0m. This represents an effective rate of (0.9)%. This differs to the tax rate in force, principally, as a result of: Prior year adjustments, representing adjustments to the allocation of group relief in finalising the tax returns for the year to 31 March 2015 (-10.3%). The allocation of the debt cap exemption, with the corresponding disallowance applying to companies in the wider Keepmoat group (-10.6%). Net debt and leverage The Group is part of the wider Keystone JVco Limited Group (Keepmoat Limited s ultimate parent company). The Group and its principal subsidiaries have given guarantees in respect of the borrowing in the Keystone JVco Limited Group. These are detailed in note 24. Working capital The amount of working capital required to service the Group s operations is closely monitored and controlled, and forms a key part of the management information reviewed on a daily, weekly and monthly basis. Current assets mainly comprise trade receivables, work in progress and land held for the development of private housing and affordable housing through partnership schemes. As the Group s focus is on public sector clients, there is no significant history of bad or doubtful debts. Performance bond facilities The Group, like most construction businesses, relies on the use of performance bonds issued by surety companies to our clients. The directors are pleased to report that the Group has adequate performance bonding lines in place with surety companies to meet the Group s growth plans. Approval of the strategic report This Strategic Report was approved by the Board of Directors and signed on its behalf by: James Thomson Chief Financial Officer and Deputy Chief Executive Officer 11 July 2016 Net debt in the wider Keystone JVco Limited Group was 171.6m (FY15: 195.1m). This corresponds to a leverage of 2.71x (FY15: 3.21x) when applied to an adjusted EBITDA of 66.7m (FY15: 63.8m).

23 2.0 Executive Board Biographies Keepmoat.com 21 Executive Team Dave Sheridan * Chief Executive Officer Dave was appointed Group Chief Executive Officer in October He joined the Apollo Group in 2008 and following the merger became Keepmoat s Chief Operating Officer for the Northern Businesses. Prior to the merger he was Chief Executive Officer of Apollo. Prior to this, Dave was Managing Director of Kier s 300m northern businesses and was responsible for taking the organisation into the top 100 Companies for the Yorkshire and Humberside Region for Environmental performance. James Thomson * Chief Financial Officer and Deputy Chief Executive Officer James was appointed Chief Financial Officer in May 2012 and Deputy Chief Executive in November He is a non-executive board member of the Housing and Finance Institute. He is also a Common Councilman for the City of London and Deputy Chairman of the City of London School. He was formerly Group Finance Director and Chief Operating Officer of DTZ Holdings plc. Prior to that, James was at Smiths Group plc, Deutsche Bank and HSBC Investment Bank. He is a Chartered Accountant and qualified with Price Waterhouse. Peter Hindley * Homes Managing Director Peter joined the Keepmoat Group in 1986, as a Contracts Manager for FHM. He was promoted to the position of Group Managing Director of Keepmoat Homes, having previously been Managing Director of Haslam Homes (now Keepmoat Homes) Yorkshire, a position he had held since Ben Denton Group Strategy and Business Development Director Ben joined Keepmoat, as Group Strategy and Business Development Director in October Ben leads the Group s growth strategy, including major projects, strategic partnerships and new business propositions across the Group. A qualified surveyor, Ben has an extensive background in leading the implementation of regeneration schemes. Prior to joining Keepmoat, he was Westminster City Council s Executive Director for Growth, Planning and Housing and held previous positions in property development and consulting. Ben is also a board member at Thames Valley Housing Association and chair of Westminster Community Homes. * Director of the Company. Member of the Executive Committee

24 3.0 Directors Report Keepmoat.com 22 Directors Report The directors present their annual report and the consolidated audited financial statements of the Group for the year ended 31 March Principal activities Keepmoat Limited is the principal holding company of the operational businesses of the Keystone JVco Limited Group. The subsidiary companies of Keepmoat Limited are engaged in the refurbishment, maintenance and construction of residential dwellings. Keepmoat Limited s subsidiaries are listed in note 25 to the financial statements. Business review and future developments The consolidated profit before tax for the financial year was 61.6m (FY15: 56.9m). The Company paid a dividend of 127,685,000 during the year to it s parent, Castle 1 Limited, as part of restructuring reserves and capital in the wider Keystone JVco Limited Group. This did not impact cash and no final dividend is proposed (FY15: nil). A review of the results, performance and future developments of the Keepmoat Limited Group of companies is presented in the Chief Executive Officer s Review on page 4 and the Strategy and Business Model on page 10. Going concern The directors have considered the adequacy of the Group s financial resources through a review of the financial projections for the business, taking into account the debt facilities available to the Group. The directors have also considered the covenants attaching to the facilities and the likely level of headroom available to the Group. After careful consideration the directors are satisfied that the Group and Company have adequate resources to continue in operation for the foreseeable future being at least twelve months from the date of signing the financial statements. For this reason the directors continue to apply the going concern basis in preparing the financial statements. Financial risk management In the course of its ordinary activities, the Group is exposed to financial risks which include liquidity, credit and interest rate risks. These risks are monitored and managed through robust policies and procedures at a Keystone JVco Limited Group level. Further details are included in note 24 of the financial statements. Liquidity risk relates to the Group generating sufficient cash flow to meet its operational requirements while avoiding debt covenant breaches or excessive debt levels in the wider Keystone JVco Limited Group. The wider Keystone JVco Limited Group s borrowings are a combination of the long-term loans previously mentioned and long-term committed revolving working capital credit facilities. Credit risk is in relation to trade receivables from clients. As a result of our strategy to generate the majority of our revenue from services to public and regulated organisations, the exposure to credit risk is extremely limited. Interest rate risk relates to the impact of interest rate increases on the wider Keystone JVco Limited Group s floating rate borrowings. At present the revolving credit and overdraft facilities are all on a floating rate and long-term borrowings are all at fixed rates of interest. Directors The directors who held office during the year and up to the date of signing the financial statements are given below: D Sheridan J Thomson P Hindley M Cutler (Resigned 10 February 2016)

25 Keepmoat.com 23 Effective ownership The ultimate parent of the company is Keystone JVco Limited. TDR Capital LLP has effective control of 85% of the issued share capital of Keystone JVco Limited whilst Sun Capital Partners has effective control of the remaining 15%. Keystone Topco Limited, which is the immediate subsidiary of Keystone JVco Limited is 15% owned by certain employees, or former employees, ( management ) of Keepmoat Limited and its subsidiaries. This means effective ownership of the Group is TDR Capital LLP 72.25%; Sun Capital Partners 12.75%; and management 15%. The directors of Keystone JVco Limited, the ultimate parent, are MA Budd, EC Hawkes and SJ Robertson. All are representatives of the shareholders who have effective control, being TDR Capital LLP and Sun Capital Partners. Employees The Group believes that its success depends upon its employees and their development. Further details are provided within the Strategic Report. Directors indemnities The Keystone JVco Limited Group maintains liability insurance for the directors and officers of member companies which remains in place up to the date of this Annual Report. The Company has also provided an indemnity for the directors, which is a qualifying third party indemnity provision for the purposes of the Companies Act Statement of directors responsibilities The directors are responsible for preparing the Strategic Report, the Directors Report and the Financial Statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and the parent company financial statements in accordance with applicable law and United Kingdom Accounting Standards ( United Kingdom Generally Accepted Accounting Practice ) including Financial Reporting Standard 101 ( FRS 101 ) Reduced Disclosure Framework. Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing these financial statements, the directors are required to: make judgements and accounting estimates that are reasonable and prudent; state whether applicable IFRSs as adopted by the European Union and applicable UK Accounting Standards, including FRS 101 have been followed, subject to any material departures disclosed and explained in the financial statements; notify its shareholders in writing about the use of disclosure exemptions, if any, of FRS 101 used in the preparation of the parent company financial statements; and prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company and the group will continue in business. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company s transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements comply with the Companies Act They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the Company s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Disclosure of information to the auditors All directors, at the date this report is approved, confirm that, as far as they are aware, there is no relevant audit information of which the Company s auditors are unaware, and that they have taken all the steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Company s auditors are aware of that information. Independent auditors PricewaterhouseCoopers LLP have indicated their willingness to continue in office. Approved by and signed on behalf of the Board James Thomson Chief Financial Officer and Deputy Chief Executive Officer 11 July 2016 select suitable accounting policies and then apply them consistently;

26 4.0 Independent Auditor s Report Keepmoat.com 24 Independent Auditor s Report to the members of Keepmoat Limited Report on the financial statements In our opinion Keepmoat Limited s group financial statements (the financial statements ) give a true and fair view of the state of the group s affairs as at 31 March 2016 and of the group s profit and cash flows for the year then ended; the group financial statements have been properly prepared in accordance with International Financial Reporting Standards ( IFRSs ) as adopted by the European Union; the financial statements have been prepared in accordance with the requirements of the Companies Act What we have audited The financial statements, included within the Annual Report and Financial Statements (the Annual Report ), comprise: The financial reporting framework that has been applied in the preparation of the group financial statements is IFRSs as adopted by the European Union, and applicable law. In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. Opinion on other matter prescribed by the Companies Act 2006 In our opinion, the information given in the Strategic Report and the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements. the consolidated balance sheet as at 31 March 2016; the consolidated income statement for the year then ended; the consolidated statement of other comprehensive income for the year then ended; the consolidated cash flow statement for the year then ended; the consolidated statement of changes in equity for the year then ended; the principal consolidated accounting policies; the notes to the financial statements, which include other explanatory information.

27 Keepmoat.com 25 Other matters on which we are required to report by exception Adequacy of accounting records and information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion: we have not received all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility. Directors remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors remuneration specified by law are not made. We have no exceptions to report arising from this responsibility. Responsibilities for the financial statements and the audit Our responsibilities and those of the directors As explained more fully in the Statement of the directors responsibilities set out on page 23, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) ( ISAs (UK & Ireland) ). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the parent company s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. What an audit of financial statements involves We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group s and the parent company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. We primarily focus our work in these areas by assessing the directors judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Other matter We have reported separately on the financial statements of Keepmoat Limited for the year ended 31 March Andy Ward Senior Statutory Auditor for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Sheffield 11 July 2016

28 5.0 Consolidated Financial Statements Keepmoat.com 26 Consolidated income statement for the year ended 31 March Note Continuing operations Group revenue 1 1,133,535 1,094,938 Cost of sales (1,002,831) (970,609) Gross profit 130, ,329 Administrative expenses (69,739) (68,833) Other operating income Share of results of equity accounted joint ventures and associates Operating profit before exceptional items and amortisation of intangibles (Adjusted operating profit) 64,183 59,452 Exceptional items 5 (2,325) (3,147) Amortisation of intangibles 8 (478) (448) Operating profit 4 61,380 55,857 Loss on disposal of interest in joint venture - (30) Finance income 6 1,241 2,054 Finance expense 6 (1,004) (969) Profit before tax 61,617 56,912 Income tax credit/(expense) (12,855) Profit for the year 62,180 44,057 Attributable to: Owners of the company 62,180 44,057 Consolidated statement of comprehensive income for the year ended 31 March Note Profit for the year 62,180 44,057 Other comprehensive expense Items that will not be subsequently reclassified to profit or loss Actuarial loss arising on retirement benefit obligations 22 (594) (991) Deferred tax on retirement benefit obligation Other comprehensive expense for the year (594) (794) Total comprehensive income for the year 61,586 43,263 Attributable to: Owners of the Company 61,586 43,263

29 Keepmoat.com 27 Consolidated balance sheet as at 31 March 2016 Assets Note Goodwill and other intangible assets 8 122, ,570 Property, plant and equipment 9 4,540 7,240 Investment property Investments in joint ventures and associates Shared equity loan receivables 13-22,500 Trade and other receivables 14 16,338 13,115 Deferred tax asset Retirement benefit asset 22 1,329 1,126 Total non-current assets 146, ,894 Inventories , ,039 Trade and other receivables , ,762 Income tax recoverable 3,041 2,136 Deferred tax asset 7 1,438 1,661 Cash and cash equivalents 15 87,460 66,415 Total current assets 538, ,013 Total assets 685, ,907 Equity Share capital Share premium account 50,000 50,000 Retained earnings 165, ,848 Other reserves Equity attributable to owners of the Parent 216, ,564 Non-controlling interests - - Total equity 216, ,564 Liabilities Trade and other payables 16 26,758 18,637 Provisions for liabilities Retirement benefit liability Deferred tax liability Non-current liabilities 28,144 19,371 Trade and other payables , ,113 Income tax payable - - Provisions for liabilities 18 1,781 1,859 Current liabilities 441, ,972 Total liabilities 469, ,343 Total equity and liabilities 685, ,907 The consolidated financial statements on pages 26 to 77 of Keepmoat Limited, registered number , were approved by the Board of Directors on 11 July 2016 and were signed on its behalf by: J Thomson Chief Financial Officer and Deputy Chief Executive Officer

30 5.0 Consolidated Financial Statements Keepmoat.com 28 Consolidated statement of changes in equity for the year ended 31 March 2016 Share capital Share premium Retained earnings Merger reserve Note 000 At 1 April 2014 (as previously reported) , , Accounting adjustments on transition to IFRS (2,207) - At 1 April , , Profit for the year ,057 - Other comprehensive expense - - (794) - Total comprehensive income for the year ,263 - Waiver of non-controlling interest At 1 April , , Profit for the year ,180 - Other comprehensive expense - - (594) - Total comprehensive income for the year ,586 - Dividends for the year ended 31 March (127,685) - At 31 March , , The Merger reserve relates to the premium that arose on the issue of ordinary shares in part consideration for the acquisition of a subsidiary company in the year ended 31 December The Capital redemption reserve relates to historic Company share repurchases.

31 Keepmoat.com 29 Other reserves Capital redemption reserve Revaluation reserve Other reserve Total other reserves Total Noncontrolling interests Total equity ,876 (611) 241,265 - (317) (51) (368) (2,575) - (2,575) ,301 (611) 238, ,057-44, (794) - (794) ,263-43, , , ,180-62, (594) - (594) ,586-61, (127,685) - (127,685) , ,465

32 5.0 Consolidated Financial Statements Keepmoat.com 30 Consolidated cash flow statement for the year ended 31 March Note Cash flows from operating activities Continuing operations Operating profit 61,380 55,857 Adjustments for: Amortisation of intangible assets Depreciation 1,909 2,506 (Profit)/loss on disposal of property, plant and equipment (3,141) 76 Gain on valuation of investment property - (24) Share of results of equity accounted joint ventures and associates (251) (38) Decrease in provisions (172) (77) Increase/(decrease) in retirement benefit obligations (77) (2,219) Operating cash flow before changes in working capital 60,126 56,530 Increase in inventories (49,111) (25,779) Decrease/(increase) in receivables 50,869 (22,544) (Decrease)/increase in payables (8,459) 51,885 Cash flow from operating activities before tax 53,425 60,092 Income tax paid (1,761) (9,212) Net cash flow from operating activities 51,664 50,880 Cash flows from investing activities Purchase of property, plant and equipment (997) (1,698) Purchase of intangible assets (821) (721) Proceeds from sale of property, plant and equipment 4, Interest received Net cash flows from investing activities 3,069 (2,358) Cash flows from financing activities Issue of loan to parent undertaking (33,646) (41,000) Interest paid (42) (57) Net cash flows from financing activities (33,688) (41,057) Net increase in cash and cash equivalents 21,045 7,465 Cash and cash equivalents at 31 March 15 87,460 66,415

33 Keepmoat.com 31 Principal accounting policies for the year ended 31 March 2016 General information Keepmoat Limited (the Company) is a private limited company incorporated and domiciled in the UK. The address of the registered office is Keepmoat Limited, The Waterfront, Lakeside Boulevard, Doncaster, DN4 5PL.The nature of the Group s operations and its principal activities are set out in note 2. The financial statements are presented in pounds sterling because the Group operates exclusively in the United Kingdom. All financial information is rounded to the nearest thousand ( 000) except where otherwise indicated. Basis of preparation These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) interpretations as adopted by the European Union and the Companies Act 2006 as applicable to companies reporting under IFRS. These are the Group s first financial statements presented in accordance with IFRS and consequently transition statements showing the impact of the change in accounting basis are presented in note 28. The financial statements have been prepared under the historical cost convention except investment property available for sale, financial assets and retirement benefit assets and liabilities which have been measured at fair value. The principal accounting policies applied in the preparation of these consolidated financial statements have been consistently applied to all the periods presented, unless otherwise stated. Going concern The directors have considered the adequacy of the Group s Financial Resources through a review of the financial projections for the business, taking into account the debt facilities available to the Group. The directors have also considered the covenants attaching to the facilities and the likely level of headroom available to the Group. After careful consideration the directors are satisfied that the Group and Company have adequate resources to continue in operation for the foreseeable future being at least 12 months from the date of signing the financial statements. For this reason the directors continue to apply the going concern basis in preparing the financial statements. Adoption of new and revised standards At the date of approving these financial statements, the following new and revised standards and interpretations were in issue but were not yet effective (and in some cases had not been adopted by the EU). None of these revised standards and interpretations have been adopted early by the Group. IAS 1 (Amended) Presentation of financial statements IAS 7 (Amended) Statement of cash flows IAS 12 (Amended) Income taxes IAS 16 (Amended) Property, plant and equipment IAS 19 (Amended) Employee benefits IAS 27 (Amended) Separate financial statements IAS 28 (Amended) Investments in associates and joint ventures IAS 34 (Amended) Interim financial reporting IAS 38 (Amended) Intangible assets IFRS 1 (Amended) First-time Adoption of International Financial Reporting Standards IFRS 5 (Amended) Non-current assets held for sale and discontinued operations IFRS 7 (Amended) Financial instruments: Disclosures IFRS 9 (Amended) Financial instruments IFRS 10 (Amended) Consolidated financial statements IFRS 15 (Amended) Revenue from contracts with customers IFRS 16 (Amended) Leases.

34 5.0 Consolidated Financial Statements Keepmoat.com 32 With the exception of those mentioned below, the directors do not anticipate that the adoption of these standards and interpretations in future periods will have a material effect on the financial position or performance of the Group and Company. The directors are in the process of assessing the potential impacts of IFRS 15 and IFRS 16. IFRS 15 will impact on both revenue recognition and disclosure requirements. The standard becomes mandatory for periods commencing on or after 1 January IFRS 16 will impact on both lease liabilities and disclosure requirements. The standard becomes mandatory for periods commencing on or after 1 January At the date of this report both IFRS 15 and IFRS 16 have yet to be adopted by the EU. Basis of consolidation The Group financial statements incorporate the results of Keepmoat Limited, its subsidiary undertakings and the Group s share of the results of joint ventures and associates. (a) Subsidiaries Subsidiaries are all entities over which the Group has control. The group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases. Business combinations are accounted for using the acquisition method. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group in exchange for control of the acquiree. Consideration transferred also includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related costs are expensed in administrative costs as incurred. All identifiable assets and liabilities acquired and contingent liabilities assumed are initially measured at their fair values at the acquisition date. The excess of the consideration transferred and the amount of any non-controlling interest as compared with the Group s share of the identifiable net assets are recognised as goodwill. Where the Group s share of identifiable net assets acquired exceeds the total consideration transferred, a gain from a bargain purchase is recognised immediately in the income statement after the fair values initially determined have been reassessed. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are eliminated in the same way as unrealised gains but only to the extent that there is no evidence of impairment. Accounting policies of acquired subsidiaries are changed where necessary to ensure consistency with accounting policies adopted by the Group. Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group s equity therein. They are initially measured at the noncontrolling interests share of the net fair value of the assets and liabilities recognised. Subsequent to acquisition, non-controlling interests consist of the amount of those interests at the date of the original business combination and the non-controlling interests share of the changes in equity since the date of the combination. (b) Joint ventures Joint ventures are accounted for using the equity method. Under the equity method of accounting, interest in joint ventures are initially recognised at cost and adjusted thereafter to recognise the Group s share of the post-acquisition profits or losses and movements in other comprehensive income. Where the Group s share of losses exceeds its equity accounted investment in a joint venture, the carrying amount of the equity interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations. Appropriate adjustment is made to the results of joint ventures where material differences exist between a joint venture s accounting policies and those of the Group. The Group determines at each reporting date whether there is any objective evidence that the investment in the joint venture is impaired. If this is the case, the Group calculates the amount of the impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the income statement adjacent to its share of profit/(loss) from associates. Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Group s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. (c) Associates Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method, applying the same policy as set out for joint ventures above.

35 Keepmoat.com 33 Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker who is responsible for allocating resources and assessing performance of the operating segments has been identified as Keepmoat Limited Group s executive directors. Revenue and profit recognition Revenue and profit are recognised as follows: Private house building, property development and land sales Revenue and profits on these activities are included in the financial statements on legal completion. Where house sales include an equity loan provided by the Group to the customer in respect of an element of the sale value (shared equity house sales), this is recognised in revenue net of discounting using an estimated financing cost. Revenue in respect of the sale of residential properties is recognised at the fair value of the consideration received or receivable upon legal completion. Open market sale plots are recognised at the agreed sales price deemed to be fair value, whilst sales to Registered Providers are recognised at the fair value of the sale. Construction contracts Revenue on construction contracts represents the fair value of work done and excludes value added tax and trade discounts. Once the outcome of a construction contract can be estimated reliably, margin is recognised in the income statement on a stage of contract completion basis by reference to management s estimate of total forecast value less total forecast costs based on the proportion of total costs incurred to date on the contract as a whole. Provision is made in full for any potential loss on construction contracts as soon as such losses become apparent. Service contracts Revenue and profit on short term contracts are recognised when the contracts have been completed. Exceptional items Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Company. They are material items of income or expense that have been shown separately due to the significance of their nature or amount. Goodwill Goodwill arises on business combinations and represents the excess of the fair value of the consideration given over the fair value of the Group s share of the identifiable net assets acquired at the acquisition date. It is recognised as an asset and reviewed for impairment at least annually or when there is a triggering event, by considering the net present value of future cash flows. For the purposes of testing for impairment, the carrying value of goodwill is compared to its recoverable amount, which is the higher of the value in use and the fair value less costs to sell. Any impairment is charged immediately to the income statement. Where the fair value of the consideration given is less than the fair value of the Group s share of the identifiable net assets acquired, the difference is immediately recognised in the income statement as a gain from a bargain purchase. Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cashgenerating units that are expected to benefit from the business combination in which the goodwill arose. Claims on customers or third parties for variations to the original contract are recognised in the income statement once entitlement to the claim has been established. Claims by customers or third parties in respect of work carried out are recognised in the income statement once the obligation to transfer economic benefit has become probable. On the balance sheet, the Group reports the net contract position for each contract as either an asset or a liability. A contract represents an asset where costs incurred plus recognised profits (less recognised losses) exceed progress billings; a contract represents a liability where the opposite is the case.

36 5.0 Consolidated Financial Statements Keepmoat.com 34 Intangible assets Other intangible assets, such as those identified on acquisition by the Group that have finite lives, are recognised at fair value and measured at cost less accumulated amortisation and impairment losses. Intangible assets are being amortised over the following periods, with amortisation being charged to cost of sales unless otherwise stated: Contracted customer relationships in line with expected profit generation, over a term of seven years. Land development rights in line with expected profit generation, varying from one to twenty years. Computer software on a straight line basis over three years (amortisation expense included in administrative expenses). Intangible assets with a finite useful economic useful life are tested for impairment when there is an indication that the intangible asset may be impaired. Property, plant and equipment All property, plant and equipment is stated at cost less accumulated depreciation and any recognised impairment losses. The cost of tangible fixed assets is their purchase cost, together with any incidental expenses of acquisition. Depreciation is calculated so as to write off the cost of each asset, less their estimated residual value, on a straight line basis over their estimated useful economic lives or until the date of disposal. The principal annual rates used for this purpose are: Freehold properties 2 Leasehold properties improvements No depreciation is provided on freehold land. Investment Properties Investment properties are initially measured at cost, being purchase price including directly attributable expenditure. Investment properties are subsequently measured at fair value. % Over the lease term Plant, equipment, fixtures and fittings Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. The Group rents surplus property under short and medium-term arrangements. Income is recognised over the period of lease when the Group can reliably measure likely flow of economic benefits. These are treated as operating lease arrangements. Trade receivables Trade receivables are initially recognised at fair value and are subsequently measured at amortised cost using the effective interest rate method with an appropriate allowance for estimated irrecoverable amounts recognised in the income statement when there is objective evidence that the asset is impaired. The carrying amount of trade receivables are reduced through the use of a provision for impairment losses. When a trade receivable is wholly or partially uncollectable, any uncollectable amount is written off against the provision. Subsequent recoveries of amounts previously written off are credited against the provision. Changes in the carrying amount of the provision are recognised in the income statement. Impairment of financial assets Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the asset have been reduced. For loans and receivables, the amount of the impairment is the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of financial assets is reduced by the impairment loss directly for all financial assets except trade receivables. If, in a subsequent period, the amount of the impairment loss previously recognised decreases and the decrease can be objectively related to an event that occurred after the impairment was recognised, the previously recognised impairment loss is reversed through the income statement.

37 Keepmoat.com 35 Inventories Inventories are valued at the lower of cost and net realisable value. (a) Land held for and under development Land held for and under development includes land purchase costs and costs directly attributable to enhancing land value. Land may be acquired at a reduced cost, with a commitment to subsequently sell developments to the seller at a similarly reduced selling price. In such cases the value of the land is adjusted to reflect its fair value, while the discount on the sale of developments is recognised as deferred income within development land payables. (b) Work in progress House developments in progress are valued at the lower of cost and net realisable value. Cost comprises direct expenditure, together with an appropriate proportion of production overheads. Net realisable value represents the estimated amount at which inventory could be realised after allowing for costs of completion and realisation. Shared equity loan receivables Shared equity loan receivables were classified as available for sale financial assets and they comprised loans advanced to homebuyers on Shared Equity scheme sales, whereby the Group had provided a portion of the finance on a house sale. These receivables were secured by a second legal charge over the property and were repayable at the earlier of 10 years, or the date on which there is a future sale of the related property and were therefore reported as non-current. Trade payables Trade payables on normal terms are not interest bearing and are stated at their nominal value. Trade payables on extended terms, particularly in respect of land, are recorded at their fair value on the date of acquisition of the asset to which they relate and subsequently held at amortised cost. The discount to the nominal value is amortised over the period of the credit term and charged to finance costs using the effective interest rate. Changes in estimates of the final payment due are taken to inventory (land held for and under development) and in due course, to cost of sales in the income statement. Loans and borrowings Interest bearing bank loans and other borrowings are recorded initially at their fair value, net of direct transaction and debt issue costs. Such instruments are subsequently carried at their amortised cost and finance charges, including commitment fees, arrangement fees and any other costs directly related to the borrowings are recognised over the term of the instrument using the effective rate of interest. Any instrument repaid before the end of the contractual term will result in any unamortised costs being immediately recognised in the income statement. Equity instruments Equity instruments such as ordinary share capital, issued by the Company are recorded at the proceeds received net of directly attributable incremental issue costs. Proceeds are allocated between nominal value and share premium. Available for sale financial assets are measured initially at fair value plus transaction costs and subsequently at fair value. The fair value of these assets is discounted back to present values using the effective interest rate. Provision is made for estimated default, to arrive at the initial fair value. The unwinding of the discount included on initial recognition at fair value is recognised as finance income in the year. Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents includes cash-in-hand, deposits held at call with banks, other short-term highly liquid investments with maturities of three months or less. Bank overdrafts are also included, as they are an integral part of the Group s cash management. In the consolidated balance sheet, bank overdrafts are shown within borrowings in current liabilities.

38 5.0 Consolidated Financial Statements Keepmoat.com 36 Income tax The income tax expense represents the current and deferred tax charges. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity. Current tax is the Group s expected tax liability on taxable profits for the year using tax rates substantively enacted at the reporting date and any adjustment to tax in respect of the previous years. Where current tax losses are available but not utilised in the period, a deferred tax asset is recognised to the extent that it is considered recoverable. Taxable profit differs from that reported in the income statement because it is adjusted for items of income or expense that are assessable or deductible in other years, or are never assessable or deductible. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax rates used in the computation of taxable profit and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised in full if future taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction which affects neither the taxable profit nor the accounting profit. Deferred tax assets and liabilities are not discounted and are only offset to the extent that there is a legally enforceable right to offset current tax assets and liabilities. Government grants Government grants are recognised at fair value when there is reasonable assurance that the Group will comply with the conditions attaching to them and the grants will be received. Grants related to purchase of assets are recognised against assets and unwound over the useful lives of the related assets. Retirement benefit obligations (a) Defined contribution plans Contributions to the defined contribution plans are charged to the income statement as they accrue. Differences between contributions payable in the year and contributions actually paid are included within either accruals or prepayments on the balance sheet. (b) Defined benefit plans For defined benefit plans the Group s retirement benefit obligation is recognised on the balance sheet and represents the deficit or surplus in the Group s defined benefit scheme. The calculation is performed by a qualified actuary on an annual basis. The scheme assets are measured using market values. Pension scheme liabilities are measured using the projected unit actuarial method and are discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liability. The increase in the present value of the liabilities of the Group s defined benefit pension scheme expected to arise from employee service in the period is charged to operating profit. Finance income on the scheme s assets and the increase during the period in the present value of the scheme s liabilities, arising from the passage of time, are included in net interest cost. Actuarial gains and losses are recognised in the consolidated statement of comprehensive income. Gains and losses arising on curtailment and settlements are taken to the income statement as incurred. Pension scheme surpluses, to the extent that they are considered recoverable, or deficits are recognised in full and presented on the face of the balance sheet. Provisions Provisions for remedial contract obligations, vacant property obligations and restructuring costs are recognised when: the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise employee termination payments. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.

39 Keepmoat.com 37 Critical accounting estimates and assumptions The preparation of financial statements under IFRS requires the Group s management to make judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying value of assets and liabilities which are not readily apparent form other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis and any revisions to them are recognised in the period in which they are revised. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Goodwill and intangible assets IFRS 3 requires the identification of acquired tangible assets as part of a business combination. The methods used to value such intangible assets require the use of estimates. Future results are impacted by the length of amortisation periods adopted, and changes to the estimated useful lives which would result in different effects on the income statement and balance sheet. Goodwill is not amortised but is tested annually for impairment, along with finite life intangible assets and other assets of the Group s cash generating units. Tests for impairment are based on discounted cash flows and assumptions (including discount rates, timing of cash flows and growth prospects) which are inherently subjective. Estimation of costs to complete, work in progress and contract provisions In order to determine the profit and loss that the Group is able to recognise on its developments and construction contracts in a specific period, the Group has to allocate total costs to the private housing developments and construction contracts between the proportion completing in the period and proportion to complete in a future period. The assessment of total costs to be incurred requires a degree of estimation. However, Group management has established internal controls to review and ensure the appropriateness of estimates made on an individual contract basis. Retirement benefit obligation valuations In determining the valuation of defined benefit schemes assets and liabilities, a number of key assumptions have been made. The key assumptions, which are given below, are largely dependent on factors outside the control of the Group: return on plan assets; inflation rate; life expectancy discount rate; and salary and pension growth rates. The Group is exposed to risks through its defined benefit schemes if actual experience differs to the assumptions used and through volatility in the plan assets. Details of the assumptions used, and associated sensitivities are included in note 22. Shared equity loan receivables Shared equity loan receivables largely have variable repayment dates and amounts, and are provided as part of sales transactions secured by a second legal charge on the related property. They are stated at fair value as described in note 13. In determining the fair value, the key assumptions, which are largely dependent on factors outside the control of the Group, are: date of final repayment of the receivable; and discount rate. Recovery of other receivables and accrued income The company makes an estimate of the recoverable value of trade and other receivables. When assessing impairment of trade and other receivables, management considers factors including credit rating of the receivable, the ageing profile of the receivable and historical experience. Fair value on land acquired at a discount to market value Where the Group enters into specific arrangements with partners who provide discounted land in return for the provision of social housing, the fair value of the housing units provided, which equates to the open market value of the discount to land, is reflected in the financial statements. Land value in the balance sheets is therefore reflected at its fair value with this fair value being released to revenue and cost of sales as the land is sold.

40 5.0 Consolidated Financial Statements Keepmoat.com 38 Notes to the consolidated financial statements for the year ended 31 March Revenue Revenue from construction contracts 802, ,427 Sale of homes 336, ,397 Other Inter-group trading (5,822) - Group Revenue 1,133,535 1,094,938 All revenue is generated in the United Kingdom. There are no single major customers that account for 10% or more of the Group s revenue. 2 Segmental reporting For management purposes the Group is organised into two operating divisions: Keepmoat Homes and Keepmoat Regeneration. Keepmoat Homes specialises in delivering high quality, stylish and great value homes, in areas benefiting from housing led regeneration. These homes are for sale on the open market to first and second time buyers and investors. Keepmoat Regeneration delivers community regeneration services including the refurbishment of social housing, planned and responsive maintenance and capital works, new build social housing for rent, new build elderly accommodation, new build public buildings and the refurbishment of education facilities. Group and corporate represent income and expenses arising from corporate activities which cannot be meaningfully allocated to the operating segments.

41 Keepmoat.com 39 2 Segmental reporting (continued) Income statement Year ended 31 March 2016 Keepmoat Homes Keepmoat Regeneration Group and corporate Inter-group trading Total Group revenue 336, , (5,822) 1,133,535 Contribution 52,219 79, ,334 Unwind of discount on shared equity loan receivables Amortisation of intangible assets (640) - Gross profit 130,704 Adjusted EBITDA 27,409 39, ,732 Unwind of discount on shared equity loan receivables Exceptional items Depreciation Amortisation of intangible assets (640) (2,325) (1,909) (478) Operating profit 61,380 Net finance income 237 Profit before tax 61,617

42 5.0 Consolidated Financial Statements Keepmoat.com 40 2 Segmental reporting (continued) Year ended 31 March 2015 Keepmoat Homes Keepmoat Regeneration Group and corporate Total Group revenue 262, , ,094,938 Contribution 43,371 84,334 (1,036) 126,669 Unwind of discount on shared equity loan receivables (1,892) Amortisation of intangible assets (448) Gross profit 124,329 Adjusted EBITDA 24,307 41,016 (1,473) 63,850 Unwind of discount on shared equity loan receivables (1,892) Exceptional items (3,147) Depreciation (2,506) Amortisation of intangible assets (448) Operating profit 55,857 Loss on disposal of interest in joint venture (30) Net finance income 1,085 Profit before tax 56,912

43 Keepmoat.com 41 2 Segmental reporting (continued) Balance Sheet As at 31 March 2016 Keepmoat Homes Keepmoat Regeneration Group and corporate Total Current assets 251, ,481 1, ,015 Current liabilities (116,352) (223,791) 11,665 (328,478) Intergroup balances (58,508) 224,042 (191,435) (25,901) Net working capital 76, ,732 (177,876) 97,636 As at 31 March 2015 Keepmoat Homes Keepmoat Regeneration Group and corporate Total Current assets 195, ,905 11, ,397 Current liabilities (102,350) (241,865) (7,031) (351,246) Intergroup balances (56,241) 237,602 (111,132) 70,229 Net working capital 36, ,642 (106,169) 131,380

44 5.0 Consolidated Financial Statements Keepmoat.com 42 3 Employees and directors Employee benefit expense during the year Wages and salaries 128, ,108 Social security costs 13,483 12,698 Other pension costs 3,567 3,472 Staff costs 145, ,278 Average monthly number of people (including executive directors) employed By activity Number Number Production 2,247 2,341 Selling and distribution Administration ,286 3,284 At 31 March 2016 the Group directly employed 3,231 (2015: 3,363) people across the UK Directors emoluments Aggregate emoluments 2,207 2,148 Company pension contributions to money purchase scheme ,287 2, Highest paid director Aggregate emoluments Company pension contributions to money purchase scheme

45 Keepmoat.com 43 3 Employees and directors (continued) Remuneration of key management personnel Salaries and short-term employee benefits 2,207 2,148 Retirement benefit costs ,287 2,237 The key management personnel comprise the executive board of the Keepmoat Limited Group and the non-executive directors. The remuneration of the key management personnel of the Group is set out above in aggregate for each of the categories specified in IAS 24, Related Party Disclosures. Included in the year is 255,000 (FY15: nil) in respect of termination. 4 Operating costs Operating costs for the year include the following: Depreciation of property, plant and equipment 1,909 1,987 Impairment of property, plant and equipment (Profit)/loss on disposal of property, plant and equipment (3,141) 76 Inventories expensed through cost of sales 252, ,825 Amortisation of intangible assets Operating lease rentals 11,774 12,268 Exceptional items (note 5) 2,325 3,147 Direct expenses for investment properties generating rental income are the responsibility of the tenant Auditors remuneration Audit of the Company s parent companies Audit of the Company s annual report Audit of the financial statements of the Group s subsidiaries Audit of the financial statements of the Group s joint ventures and associates Total audit services Tax compliance services Tax advisory services Fees payable to the Company s auditor in respect of associated pension schemes 8 7 Other non-audit assurance services Other non-audit services Total other services Total auditors remuneration

46 5.0 Consolidated Financial Statements Keepmoat.com 44 5 Exceptional items Restructuring costs 2,114 - Acquisition related fees Evolve Built for Life impairment - (186) Pension plan settlement gain - (1,909) Fair value loss on shared equity portfolio - 4,528 Loss on disposal of the shared equity loan receivable portfolio 3,243 - (Profit)/Ioss on disposal of property (3,032) - 2,325 3,147 All exceptional items are included within administrative expenses. Restructuring costs The Group has incurred significant costs restructuring its Regeneration division in order to deliver its business plan and strategic goals. These costs comprised redundancies and costs in relation to vacating properties. Acquisition related costs These fees include advisor fees incurred on acquisition of Lakeside 1 Limited. Evolve build for life impairment These exceptional gains result from the write off of all balances relating to Evolve Built for Life Limited, following a waiver from to its shareholder creditors, Keepmoat Limited and Thurston Group Limited. Pension plan settlement On 31 December 2014, the Group ceased to be a participating employer in the Derbyshire Local Governments Pension Scheme following the conclusion of a related contract. The non-recurring settlement gain of 825,000 was credited to the income statement. Fair value shared equity portfolio The Group has stated the shared equity debt at it s fair value. This resulted in an exceptional loss of 4,528,000. Disposal of shared equity portfolio On 12 August 2015 the Group sold its entire shared equity book, with carrying value of 22.9m for a consideration of 19.7m. Profit/loss on disposal of property During the year the group disposed of its Balby Court and Lakeside offices for a cash consideration of 4,567,000 making a gain on disposal of 3,032,000.

47 Keepmoat.com 45 6 Finance income and expense Unwind of discount on shared equity loan receivables 640 1,892 Net finance income on retirement benefit obligations (note 22) Other interest income Finance income 1,241 2,054 Unwind of discount on deferred land payments (963) (946) Other interest payable (41) (23) Finance expense (1,004) (969) Net finance income 237 1,085

48 5.0 Consolidated Financial Statements Keepmoat.com 46 7 Income tax Current tax UK corporation tax on profit for the year at 20% (FY15: 21%) 4,613 11,920 Adjustments in respect of previous years (6,194) (554) Current tax (credit)/charge (1,581) 11,366 Deferred tax Origination and reversal of timing differences 967 1,136 Adjustments in respect of previous years (152) 453 Difference in applicable tax rates 203 (100) Deferred tax charge 1,018 1,489 Income tax (credit)/charge for the year (563) 12,855 The table below reconciles the income tax expense for the year to tax at the UK statutory rate: Profit before tax 61,617 56,912 Income tax charge at UK corporation tax rate at 20% (FY15: 21%) 12,323 11,952 Effect of: Expenses not deductible for tax purposes 222 4,301 Non-taxable income (614) (2,907) Transfer pricing adjustment (435) - Adjustment in respect of previous years (6,346) (101) Land remediation relief (335) (334) Difference in applicable tax rates 238 (56) Debt cap adjustment (6,552) - Transitional adjustments Income tax (credit)/charge for the year (563) 12,855 Factors affecting current and future tax charges Changes to the UK corporation tax rates were substantively enacted as part of the Finance Bill on 25 November These include reductions to the main rate to of corporation tax to 19% from 1 April 2017 and to 18% from 1 April Deferred tax is calculated in full on temporary differences under the liability method, using a tax rate of 19% (FY15: 20%). It was also announced in the 2016 Budget statement that the rate of corporation tax would be reduced to 17% for the financial year commencing 1 April This has not been substantially enacted so is not included in the financial statements.

49 Keepmoat.com 47 7 Income tax (continued) The analysis of deferred tax assets and liabilities is as follows: Deferred tax assets 2,402 3,366 Deferred tax liabilities (266) (212) At 31 March 2,136 3,154 Expected to be recovered or settled within one year 1,438 1,661 Expected to be recovered or settled in more than one year 698 1,493 2,136 3,154 The movement for the year in the net deferred tax account is as shown below: At 1 April 3,154 4,446 Credit to income statement (1,018) (1,489) Charge to other comprehensive income At 31 March 2,136 3,154 The movement in deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances is as follows: Property, plant and equipment Tax losses Retirement benefit obligations Other Total Deferred tax assets 000 At 1 April ,347 2, ,446 (Credit)/charge to income statement (144) (2,259) - 1,360 (1,043) Credit to other comprehensive income Transfer to liabilities - - (37) - (37) At 1 April , ,101 3,366 Charge to income statement (248) - - (716) (964) Credit to other comprehensive income At 31 March ,385 2,402 Deferred tax assets have been recognised in respect of tax losses and other temporary differences giving rise to deferred tax assets, where it is probable that the assets will be recovered.

50 5.0 Consolidated Financial Statements Keepmoat.com 48 7 Income tax (continued) Retirement benefit obligation Total Deferred tax liabilities 000 At 1 April Transfer from assets (37) (37) (Credit)/charge to income statement Credit to other comprehensive income (197) (197) At 1 April (Credit)/charge to income statement Credit to other comprehensive income - - At 31 March There is no unprovided deferred tax (FY15: nil). 8 Intangible assets Goodwill Computer Software Total Cost At 1 April ,703 2, ,317 Additions At 1 April ,703 3, ,038 Additions At 31 March ,703 4, ,859 Accumulated amortisation At 1 April ,019 2,019 Charge for the period At 1 April ,468 2,468 Charge for the period At 31 March ,946 2,946 Net book amount At 31 March ,703 1, ,913 At 31 March , ,570 At 31 March , ,298

51 Keepmoat.com 49 8 Intangible assets (continued) Goodwill is allocated to the Group s cash-generating units (CGUs) identified according to business segment. The group has not retrospectively applied IFRS 3 business combinations at the transition date. The deemed brought forward goodwill has been allocated to CGUs based on the discounted cash flow forecasts of the respective businesses. The goodwill is attributable to the following business segments: Keepmoat Homes - - Keepmoat Regeneration 121, ,703 At 31 March 121, ,703 The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. In testing goodwill and other intangible assets for impairment, the recoverable amount of each cash-generating unit has been determined from value in use calculations. The key assumptions for the value in use calculations are those regarding the forecast revenue and profit, discount rates and long-term growth rates by market sector. Future forecast revenue is based on management s knowledge of actual results from prior years and latest forecasts for the current year, along with secured works, management s expectation of the future level of work available within the market sector and expected changes in selling volumes and prices for completed houses. In establishing future profit margins, the margins currently being achieved are considered in conjunction with expected inflation rates in each cost category and the current market value of land being acquired. Cash flows beyond the five year plan period are extrapolated using an estimated growth rate of 0.5% (FY15: 0.5%) per annum within Regeneration. The growth rate used is the Group s estimate of the average long-term growth rate for the market sectors in which the CGU operates. A pre-tax discount rate of 11.0% (FY15: 11.5%) has been applied, being the estimated weighted average cost of capital of each division. The Group applied sensitivities to the assumptions used in the cash flows noted above and the sensitivities resulted in headroom which was materially above the carrying value.

52 5.0 Consolidated Financial Statements Keepmoat.com 50 9 Property, plant and equipment Long leasehold property Freehold land and property Plant, equipment, fixtures and fittings Total Cost At 1 April ,373 10,752 10,728 22,853 Additions ,673 1,698 Disposals - - (4,448) (4,448) Reclassification (453) (2,326) (282) (3,061) At 1 April ,451 7,671 17,042 Additions Disposals - (5,175) (1,648) (6,823) At 31 March ,142 3,276 6,798 11,216 Accumulated depreciation At 1 April ,303 7,903 13,590 Charge for the year ,580 1,987 Impairment Disposals - - (4,372) (4,372) Reclassification (129) (1,763) (30) (1,922) At 1 April ,222 5,081 9,802 Charge for the period ,476 1,909 Disposals - (3,410) (1,625) (5,035) At 31 March ,932 6,676 Net book amount At 31 March ,338 1,866 4,540 At 31 March ,229 2,590 7,240 At 31 March ,449 2,825 9,263 There has been no impairment of property, plant and equipment during the year. During the year ended 31 March 2015, freehold property was impaired by 519,000 to its recoverable amount following a review of asset carrying values connected with the acquisition of the Keepmoat Limited Group s, then ultimate parent, Lakeside 1 Limited, During the year ended 31 March 2015 freehold property with a net book value of 563,000 was reclassified to current assets as land held for and under development. Additionally, freehold property with a net book value of 576,000 was reclassified to investment property (note 10). Certain freehold properties with a net book amount of 2,780,000 (FY15: 4,837,000) are subject to fixed charges in connection with the Group s revolving credit facilities. There are floating charges over all remaining assets.

53 Keepmoat.com Investment property Investment property Fair value At 1 April Reclassification 576 Fair value gain 24 At 1 April Fair value gain - At 31 March Property with a net book value of 576,000 was reclassified from property, plant and equipment to investment property during the year ended 31 March 2015 and consequently revalued to its fair value. The Group has adopted the cost model for accounting for Investment property on transition to IFRS and consequently recognises fair value on transition as cost. Investment property is stated at the directors assessment of fair value as at 31 March This reflects, amongst other things, rental income from our current leases and assumptions about rental income for future leases, in the light of current market conditions and consideration of market evidence for similar property if appropriate. As the amount is not material to the Group, it is not considered necessary to provide the fair value disclosures from IFRS Investments in joint ventures and associates Details of operating joint venture undertakings and associates, all of which are incorporated in England and Wales, are as follows: Name of undertaking Description of shares and proportion of nominal value of that class held Proportion of voting rights held by Group Accounting year end SOAR Build Limited Durham Villages Regeneration Limited Sheffield Housing Company Limited Ordinary shares of 1 each (50% held) A class ordinary shares of 1 each (51% held) Ordinary shares of 1 each (45% held) 50% 31 March 50% 31 March 45% 31 March BK Scotswood LLP Members capital (50% held) 50% 31 December New Tyne West Development Company LLP Members capital (25% held) 25% 31 December Osmaston Regeneration Partnership LLP Members capital (50% held) 50% 31 March SOAR Build Limited is a joint venture between Keepmoat Limited and SOAR Enterprises Limited. Its principal activity is training local people in construction skills whilst working on major contracts as a subcontractor. The Company s registered office is: 11 Southey Hill, Sheffield, S5 8BB. Durham Villages Regeneration Limited is a joint venture between Keepmoat Limited and Durham County Council. Its principal activities are private housebuilding, land sales and property development. The Company s registered office is: The Waterfront, Lakeside Boulevard, Doncaster DN4 5PL. Under agreements between Keepmoat Homes Limited, Durham Villages Regeneration Limited and Durham City Council (on 1 April 2010 Durham City Council merged into the Unitary Authority of Durham County Council), Keepmoat Homes Limited has a license to build on land owned by Durham Villages Regeneration Limited. Keepmoat Homes Limited is a wholly owned subsidiary of Keepmoat Limited.

54 5.0 Consolidated Financial Statements Keepmoat.com Investments in joint ventures and associates (continued) Sheffield Housing Company Limited is an associated undertaking of Keepmoat Limited. Its principal activity is the building and sale of new homes in the Sheffield area. The Company s registered office is: Sheffield Town Hall, Pinstone Street, Sheffield, S1 2HH. BK Scotswood LLP is a joint venture between Keepmoat Limited and BDW Trading Limited. Its principal activity is to invest in a joint venture undertaking, New Tyne West Development Company LLP, with Newcastle City Council. Its principal activities are to facilitate regeneration and property development. The Company s registered office is: Barratt House, City West Business Park, Scotswood Road, Newcastle upon Tyne, NE4 7DF. Osmaston Regeneration Partnership LLP is a joint venture between Keepmoat Limited and Derbyshire County Council formed in February The Company did not trade during the year ended 31 March 2016 or 31 March The principal activity of the Company will be procuration and delivery of new build housing and refurbishment within the Osmaston estate in Derby. The Company s registered office is: The Waterfront, Lakeside Boulevard, Doncaster, DN4 5PL. Details of transactions with these companies are set out in note 25. Investments in equity accounted joint ventures and associates are as follows: Joint Ventures Associates Total At 1 April Disposal of investment (73) - (73) Equity accounted share of net profits At 1 April Equity accounted share of net profits As at 31 March The Group disposed of its interest in Urban Union Limited, a joint venture between Keepmoat Limited, McTaggert Construction Limited and Robertson Group (Holdings) Limited on 28 April 2014 for consideration of 43,000.

55 Keepmoat.com Inventories Land held for and under development 94,107 58,076 House building developments in progress 103,042 89,836 Other work in progress At 31 March 197, ,039 The Group carries out a detailed annual review of the net realisable value of land held for and under development both relating to plots currently in development, and land and phases of sites not yet in development. Net realisable value for land where construction of homes had commenced at the year end or is anticipated to commence within the next 12 months was assessed by estimating selling prices and costs (including sales and marketing expenses) taking into account current market conditions. Land where house building had not commenced at the year end and was more likely to be sold undeveloped is assessed by re-appraising the land using current selling prices and costs for the proposed development and assuming an appropriate financial return to reflect the current housing market conditions and the prevailing financing environment. At 31 March 2016, the net realisable value provision amounts to 1.0m (FY15: 1.0m). This provision will be closely monitored for adequacy and appropriateness as regards under and over provision to reflect circumstances at future balance sheet dates. Government grants are recognised as deferred income and are allocated to the income statement over the useful lives of the related assets. The effect of this treatment is to reduce the fair value of work in progress by 3,068,000 (FY15: 6,217,000) and to reduce cost of sales in the income statement by 7,256,000 (FY15: 4,897,000). 13 Shared equity loan receivables At 1 April 22,500 26,235 Settlements (765) (1,099) Unwind of discount 640 1,892 Fair value adjustment - (4,528) Sale of shared equity portfolio (22,375) - At 31 March - 22,500 Shared equity loan receivables are available for sale financial assets comprising amounts receivable in respect of loans made under shared equity home ownership schemes. There have been no new shared equity loans advanced during the year. The shared equity loan receivables largely have variable repayment dates and repayments amounts, provided as part of the sales transaction. They are due for repayment on the earlier of 10 years or the date on which there is a future sale of the related property. Interest is charged at a rate of 3% on certain receivable balances after 5 years, increasing each year thereafter in line with the Retail Prices Index plus 1%.

56 5.0 Consolidated Financial Statements Keepmoat.com Shared equity loan receivables (continued) The assets are recorded at fair value, being the estimated future receivable by the Group, discounted back to present values. The fair value of the anticipated receipts is based on an external commercial valuation of the portfolio and has been validated by reference to the fair value of similar assets observed in the market place, as adjusted to reflect the age, terms and credit risk attaching to the Group s own shared equity receivables. On 12 August 2015 the Group sold its entire shared equity debtor book for a consideration of 19,703,000. The amount is included in the Consolidated cash flow statements as a decrease in receivables. The exceptional loss on sale of 3,243,000 includes disposal costs and has been reported in administrative expenses in the income statement. 14 Trade and other receivables Non-current: Trade receivables 12,759 9,234 Amounts due from subsidiary undertakings - - Amounts due from related party undertakings (note 25) 3,579 3,881 16,338 13,115 Current Trade receivables 86, ,839 Less: provision for impairment of receivables (1,660) (1,858) Trade receivables net of provision for impairment 85,018 99,981 Amounts due from construction contract customers 59,403 59,134 Amounts due from parent undertakings 89,124 92,920 Amounts due from related party undertakings (note 25) 2,460 2,426 Other receivables 6,151 22,134 Prepayments and accrued income 7,396 7, , ,762

57 Keepmoat.com Trade and other receivables (continued) Movements on the Group provision for impairment of trade receivables are as follow: As at 1 April 1,858 - On acquisition - 2,137 Credited to the income statement (198) (279) Utilised - - As at 31 March 1,660 1,858 Provisions for impaired receivables have been included in cost of sales in the income statement. Consideration of the credit quality of trade receivables is set out under credit risk in note Cash and cash equivalents Cash at bank and in hand 87,460 66, Trade and other payables Non-current: Trade payables 13,311 7,388 Development land payables 13,447 11,249 Amounts due to parent undertaking (note 25) ,758 18,637 Current Trade payables 207, ,253 Amounts due to construction contract customers 31,712 30,090 Amounts due from related party undertakings (note 25) Amounts due to parent undertaking 112,527 24,782 Other tax and social security 5,459 14,516 Other payables 969 1,865 Development land payables 44,193 23,511 Accruals and deferred income 35,837 46, , ,113

58 5.0 Consolidated Financial Statements Keepmoat.com Trade and other payables (continued) The maturity profile of the anticipated undiscounted future cash flows, based on the earliest date on which the Company can be required to pay financial liabilities on an undiscounted basis, is as follows: Trade payables Development land payables Total Period ended 31 March 2016 More than one year and less than two years 13,311 6,428 19,739 More than two years and less than five years - 6,913 6,913 More than five years - 7,066 7,066 13,311 20,407 33,718 Trade payables Development land payables Total Period ended 31 March 2015 More than one year and less than two years 7,388 6,910 14,298 More than two years and less than five years - 5,326 5,326 More than five years - 1,902 1,902 7,388 14,138 21, Construction contracts Construction contracts in progress at the balance sheet date Amounts due from construction contract customers (note 14) 59,403 59,134 Amounts due to construction contract customers (note 16) (31,712) (30,090) Carrying value at 31 March 27,691 29,044 Contract costs incurred plus recognised profits less recognised losses to date 1,405,280 1,184,077 Less: progress billings (1,377,589) (1,155,033) 27,691 29,044 The contract costs and progress billings above represent life of underlying contract values.

59 Keepmoat.com Provisions for liabilities Onerous leases Dilapidations Other Total At 1 April , ,394 (Credited)/charged to the income statement (64) 126 (131) (69) Utilised during year - (8) (8) At 1 April , ,317 (Credited)/charged to the income statement (107) (34) Utilised during year - - (137) (137) At 31 March , ,146 Current 64 1, ,781 Non-current At 31 March , ,146 Current 107 1, ,859 Non-current At 31 March , ,317 Onerous Leases The onerous lease provision relates to the Group s leased estate. The provision is calculated on a property by property basis and is calculated up to the next available break date or end of lease, whichever is the earlier. Dilapidations The dilapidations provision covers the Group s leased estate. A full provision up to the end of each lease was established by an independent external valuer, with the element up to the date of the financial statements being recognised in the accounts on a pro-rated straight line basis. Other provisions Other provisions comprise legal fees in relation to claims. All provisions are stated at expected cost as the effects of discounting are deemed to be immaterial.

60 5.0 Consolidated Financial Statements Keepmoat.com Share capital Number Number Allotted, called up and fully paid Ordinary shares of 1 each 312, , Total 312, , All shares rank pari passu in all respects. 20 Financial commitments At 31 March 2016, the Group has entered into non-cancellable contracts for the operational leasing of land and buildings and plant and machinery. The leases have various terms, escalation clauses and renewal rights. The minimum commitments for payments under these contracts are as follows: Within one year 1,774 1,617 Later than one year and less than five years 6,794 7,019 After five years - 1,427 Total 8,568 10,063 These relate to operational leasing of land and buildings and plant, machinery and vehicles. 21 Operating lease agreements where the Group is a lessor The Group holds surplus office buildings as investment properties as disclosed in note 10, one of which is let to third parties. Future minimum rentals receivables under non-cancellable operating leases are as follows: Within one year Later than one year and less than five years Total 72 96

61 Keepmoat.com Retirement benefit schemes Hybrid group pension scheme The Group operates a hybrid group pension scheme, the Keepmoat Limited Group Pension Plan, with assets held in independently administered funds. The scheme has been accounted for as a defined benefit pension plan. A full actuarial valuation of the scheme was carried out at 5 April 2013 and this has been updated to 31 March 2016 by a qualified independent actuary. The scheme assets are stated at their market value at 31 March There are no restrictions on recognition of the pension assets as on cessation of the scheme, any resulting scheme surplus would be made available to the Group. The major assumptions used by the actuary to calculate the liabilities of the Keepmoat Limited Group Pension Plan are: % % Discount rate Inflation rate Salary increase rate The mortality assumptions used were as follows: Years Years Pensioner age at 65: - Men Women Current member age at 45: - Men Women The net funding status of the plan is as follows: Total fair value of assets 6,797 7,434 Present value of scheme liabilities (5,468) (6,308) Retirement benefit asset 1,329 1,126 Asset allocation Equities 65.2% 73.4% Bonds 20.1% 13.6% Cash 14.7% 13.0% Total 100.0% 100.0%

62 5.0 Consolidated Financial Statements Keepmoat.com Retirement benefit schemes (continued) Reconciliation of present value of scheme liabilities At 1 April 6,308 5,332 Current service cost Interest cost Remeasurement (gains) / losses: Actuarial losses arising from changes in financial assumptions Actuarial (gains) / losses arising from experience adjustments (491) 260 Benefits paid (817) (195) At 31 March 5,468 6,308 Reconciliation of present value of scheme assets At 1 April 7,434 6,585 Interest income on scheme assets Return on plan assets (excluding amounts included in net interest income) (261) 489 Employer contributions Benefits paid (817) (195) Expenses paid (118) (68) At 31 March 6,797 7,434 Scheme assets do not include any of the Group s own financial instruments, or any property occupied by the Group. Analysis of amounts charged to the income statement: Current service cost Expenses paid Operating profit Interest income on pension scheme assets (223) (283) Interest on pension scheme liabilities Net interest income (34) (54) Net retirement benefit expense

63 Keepmoat.com Retirement benefit schemes (continued) Analysis of amounts charged to the statement of comprehensive income Return on plan assets (excluding amounts included in net interest income) (261) 489 Actuarial (losses) arising from changes in financial assumptions (173) (593) Actuarial gains / (losses) arising from experience adjustments 491 (260) Actuarial gains / (losses) arising on retirement benefit obligations 57 (364) History of experience gains and losses Plan assets 6,797 7,434 Defined benefit obligation (5,468) (6,308) Surplus 1,329 1,126 Experience adjustments on plan assets (261) 489 Experience adjustment on plan liabilities 318 (853) Total actuarial gains / (losses) recognised in the consolidated statement of comprehensive income 57 (364) Sensitivity analysis of scheme liabilities The defined benefit obligation is sensitive to changes in key actuarial assumptions. The sensitivity analysis below shows how a reasonably possible increase or decrease in a particular assumption, in isolation, results in an increase or decrease in the present value of the defined benefit obligation as at 31 March Discount rate: 0.25% p.a. increase (203) (254) 0.25% p.a. decrease Inflation rate: 0.25% p.a. increase % p.a. decrease (139) (168) Life expectancy: 1 year increase year decrease (103) (88) The sensitivity analysis may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of each other. In presenting the sensitivity analysis, the value of the defined benefit obligation has been calculated on the same basis that applied in calculating the defined benefit obligation at the balance sheet date. The average duration of the benefit obligation at the end of the reporting year is around 18 years.

64 5.0 Consolidated Financial Statements Keepmoat.com Retirement benefit schemes (continued) Multi-employer schemes The Group participated in two multi-employer schemes during the year, namely West Yorkshire Local Government Pension Scheme ( West Yorkshire LGPS ) and Durham County Council Pension Fund ( Durham ). The assets of these schemes are held in independently administered funds and have been accounted for as defined benefit obligations. The Group is responsible for funding the pension benefits for its employees only. The Group joined the Durham County Council Pension Scheme during the year as a result of a TUPE transfer of employees arising from the commencement of a new contract. The Group ceased its membership of the Derbyshire plan on 31 December 2014 giving rise to a net settlement gain of 963,000 which was reported in administrative expenses in the income statement. The most recent full actuarial valuation of the West Yorkshire LGPS was at 5 April 2013 and Durham at 1 July 2015 and these have been updated to 31 March 2016 by a qualified independent actuary. The scheme assets are stated at their market value at 31 March The major assumptions used by the actuary to calculate the liabilities of the defined benefit plan are: % % Discount rate Inflation rate Salary increase rate The mortality assumptions used were as follows: Years Years Pensioner age at 65: - Men Women Current member age at 45: - Men Women The net funding status of the plan is as follows: Years Years 4, Present value of scheme liabilities (4,829) (230) Retirement benefit liability (755) (64)

65 Keepmoat.com Retirement benefit schemes (continued) Asset allocation As at 31 March Quoted Unquoted Total Total Equities 42.1% 0.3% 42.4% 76.4% Bonds 25.5% 14.3% 39.8% 15.1% Property 1.5% 6.4% 7.9% 4.2% Cash 9.8% 0.0% 9.8% 2.1% Other 0.0% 0.1% 0.1% 2.2% Total 78.9% 21.1% 100.0% 100.0% Reconciliation of present value of scheme liabilities Opening defined benefit obligation 230 8,803 On admittance to the scheme 4,679 - Current service cost Interest cost Employee contributions Remeasurement gains: Actuarial gains arising from changes in financial assumptions Settlements - (10,064) Benefits paid (414) (45) Closing defined benefit obligation 4, Reconciliation of present value of scheme assets Opening fair value of plan assets 166 7,360 On admittance to the scheme 4,075 - Interest income on scheme assets Return on plan assets (excluding amounts included in net interest income) Employer contributions Employee contributions Settlements - (8,017) Benefits paid (414) (45) Closing fair value of plain assets 4, Scheme assets do not include any of the Group s own financial instruments, or any property occupied by the Group.

66 5.0 Consolidated Financial Statements Keepmoat.com Retirement benefit schemes (continued) Analysis of amounts charged to the income statement: Current service cost Settlement gains (note 5) - (2,047) Operating loss/(profit) 106 (1,800) Interest income on pension scheme assets (114) 234 Interest on pension scheme liabilities 132 (263) Net interest cost 18 (29) Net retirement benefit expense / (income) 124 (1,829) Analysis of amounts charged to the statement of comprehensive income Return on plan assets (excluding amounts included in net interest income) 24 (343) Actuarial (gains) / losses arising from changes in financial assumptions (71) 970 On inception of scheme (604) - Actuarial gains / (losses) arising on retirement benefit obligation (651) 627 History of experience gains and losses Plan assets 4, Defined benefit obligation (4,829) (230) Deficit (755) (64) Experience adjustments on plan assets Experience adjustment on plan liabilities (71) (970) On admittance to the scheme (604) - Total actuarial losses recognised in the consolidated statement of comprehensive income (651) (627)

67 Keepmoat.com Retirement benefit schemes (continued) Sensitivity analysis of scheme liabilities The defined benefit obligation is sensitive to changes in key actuarial assumptions. The sensitivity analysis below shows how a reasonably possible increase or decrease in a particular assumption, in isolation, results in an increase or decrease in the present value of the defined benefit obligation as at 31 March Discount rate: 0.1% p.a. increase (81) (7) 0.1% p.a. decrease 83 7 Inflation rate (salaries): 0.1% p.a. increase % p.a. decrease (27) (4) Life expectancy: 1 year increase year decrease (125) (6) The sensitivity analysis may not be representative of an actual change in the defined benefit obligation as it is unlikely that changes in assumptions would occur in isolation of each other. In presenting the sensitivity analysis, the value of the defined benefit obligation has been calculated on the same basis that applied in calculating the defined benefit obligation at the balance sheet date. The average duration of the benefit obligation at the end of the reporting period is around 16.5 years (FY15: 26.8 years). Defined contribution schemes The pension cost charged to the income statement in respect of the defined contribution scheme during the year was 3,355,000 (FY15: 3,136,000) representing contributions payable in the year. Contributions due to the defined contribution schemes at the year end were 231,000 (FY15: 441,000). 23 Contingent liabilities The Group has entered into performance guarantees in the normal course of business which, at 31 March 2016, amounted to 29.3m (FY15: 49.8m). In the opinion of the directors, no loss will arise in respect of these guarantees. The Company has given guarantees in respect of the bank borrowings of its subsidiary companies in addition to performance and other guarantees. At 31 March 2016 borrowings covered by the guarantees amounted to nil (FY15: nil) whilst performance and other guarantees provided under the revolving credit facility amounted to 10.7m (FY15: 19.9m). The guarantees are in the form of a fixed charge over certain freehold land and buildings and floating charges over the assets of certain Group companies. 24 Financial instruments Capital risk management The Group s objectives when managing capital are to safeguard the Group s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders by ensuring that the Group maintains sufficient liquidity to sustain its present and forecast operations. The wider Keystone JVco Limited Group monitors current and forecast cash liquidity and bond liquidity against available facilities to ensure that there is sufficient capacity to meet requirements for the foreseeable future. As part of its covenants, the wider Keystone JVco Limited Group also measures its leverage requirement as a ratio of adjusted EBITDA to net debt. The leverage covenant requirement reduces over time. At 31 March 2016, the ratio of 2.71 for a 12 month period was within the required ratio of 5.5 (At 31 March 2015, 3.21 for a 12 month proforma period was within the required ratio of 5.85).

68 5.0 Consolidated Financial Statements Keepmoat.com Financial instruments (continued) Financial risks and management The wider Keystone JVco Limited Group s principal financial instruments comprise senior secured notes, bank loans, subordinated shareholder loan notes, and cash. The main purpose of these financial instruments is to raise finance for the Group s operations. The Group has other financial instruments including trade receivables and trade payables, which arise directly from operations. No trading in financial instruments has been undertaken. The Group has exposure to a variety of financial risks through the conduct of its operations. The Board reviews and agrees policies for managing risk as well as specific policies and guidelines. The key financial risks resulting from the Group s use of financial instruments are credit risk, liquidity risk and market risk. (a) Credit risk Credit risk is the risk of financial loss to the Group if a customer fails to meets its contractual obligations mainly arising on the Group s trade receivables and amounts due from construction contract customers. The Group s exposure to credit risk is limited for housebuilding activities as the Group typically receives cash at the point of legal completion of its sales. Shared equity loan receivables are those advanced to house buyers to assist in their purchase of property under shared equity schemes. The loans are secured by a second charge over the property and are held at fair value. The credit risk on regeneration activities depends on the individual characteristics of the contract counterparty many of whom are in the public sector or are funded by the public sector (e.g. housing associations). The Board consider that the credit rating of these customers is good and the credit risk on outstanding balances to be low. The Group does not have any concentration of risk in respect of amounts due from construction contract receivables or trade receivable balances, with receivables spread across a wide range of customers. The ageing of trade receivables is as follows: Gross trade receivables Provision for impairment Gross trade receivables Provision for impairment 000 Number of days past due date: Not past due 80,609-92,546 - Past due 1 to 30 days 6,848-6,606 - Past due 31 to 90 days 3,815-3,094 - Past due 91 to 365 days 2,437-3,023 - Past due greater than one year 5,727 1,660 5,804 1,858 Total 99,436 1, ,073 1,858 Included within the Group s trade receivable balance are receivables with a carrying amount of 15.5m (2015: 16.7m) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the Group considers that the amounts are still recoverable. Due to the nature of the Group s operations, it is normal practice for customers to hold retentions in respect of contracts completed. Retentions held by customers at 31 March 2016 were 26.1m (FY15: 28.9m). In order to ensure an efficient collection of retentions, the Group maintains ongoing contact with customers to ensure that potential issues that could lead to the non-payment of retention monies are minimised. The amounts due from construction contract customers and other trade receivable balances are reviewed for collectability on a routine basis and where there are indications of impairment these are immediately recognised.

69 Keepmoat.com Financial instruments (continued) (b) Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as and when they fall due. An ageing profile of the Group s loans and borrowings is presented in note 16. The Group s objective is to manage liquidity by ensuring that it will always have sufficient liquidity to meet its liabilities as they become due. This will be assessed under normal and stress conditions, without incurring losses or risking damage to the Group s reputation. The Keystone JVco Limited Group s primary sources of capital are 263.0m 9.5% Senior Secured Notes due for repayment in 2019 which is supplemented by subordinated shareholder loan notes of 30.0m repayable on maturity on 28 November Short term liquidity is managed through the use of committed bank facilities and cash. See note 16 for maturity analysis of the Group s non-derivative financial liabilities. The Group has rigorous cash management processes. Cash balances are reported daily with detailed analysis of variances to short term cash forecasts. Short term cash forecasts are updated monthly and are for a period of 26 weeks with the first 8 weeks on a daily basis and the remaining 18 weeks on a weekly basis. These complement a minimum of four long term quarterly cash forecasts each year which are compared to the annual cash flow budget and to previous quarterly forecasts. These facilitate management s assessments of the Group s expected cash performance and to compare to the facilities available. Key risks to liquidity and cash balances are a downturn in contracting volumes, a decrease in the value of open market sales, a downturn in the UK housing market, deterioration in credit terms obtainable in the market from suppliers and subcontractors, a downturn in the profitability of work, delayed receipt of cash from customers and a general decline in the ability of local authorities to fund urban regeneration projects. In order to mitigate this risk the Group continually monitors the Regeneration committed order book and the development pipeline, including the status of orders and likely timescales for realisation; regular monitoring of open market house sales volumes and prices; continuous monitoring of working capital levels and contract profitability and the review of client and supplier credit references and credit terms with clients and suppliers to ensure they continue to be appropriate. The Group does not have any derivative financial liabilities. (c) Market risk Market risk is the risk that changes in market prices such as interest rates, house prices and foreign exchange rates will affect the Group income or the value of the Group s financial instruments. Interest rate risk The wider Keystone JVco Limited Group s exposure to changes in market interest rates is significantly mitigated as its long-term borrowings comprise exclusively fixed interest rate instruments. The committed bank facilities are at floating interest rates at a margin over the London Interbank Borrowing Rate (LIBOR) and management continually keeps this exposure under review. At 31 March 2016, 100% (FY15:100%) of the wider Keystone JVco Limited Group s borrowings were at a fixed rate of interest. Housing Market risk The Group is affected by price fluctuations of the UK housing market. The market is impacted by consumer demand and employment levels and is dependant on the availability of mortgage finance. Furthermore, Government incentives, such as the Help to Buy scheme, have helped to stimulate consumer demand. Whilst these risks are beyond the Group s ultimate control, risk is spread across differing business activities undertaken by the Group and the geographical regions in which it operates. Currency risk The Group operates entirely in the United Kingdom and all of the Group s revenue is generated in the United Kingdom and is denominated in pounds sterling. Consequently the Group has very limited exposure to currency risk. Fair values of financial instruments Trade and other receivables The fair value of trade and other receivables, excluding construction contract receivables, is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. The carrying amount of trade and other receivables is a reasonable approximation of their fair value.

70 5.0 Consolidated Financial Statements Keepmoat.com Financial instruments (continued) Trade and other payables The fair value of trade and other payables, excluding construction contract payables, is estimated as the present value of future cash flows, discounted at the market rate of interest at the balance sheet date if the effect is material. The carrying amount of trade and other payables is a reasonable approximation of their fair value. Cash and cash equivalents The fair value of cash and cash equivalents is estimated at its carrying amount where the cash is repayable on demand. Set out below is a comparison by category of carrying amounts and fair values of all the Group s financial instruments: The ageing of trade receivables is as follows: Carrying amount Fair value Carrying amount Fair value 000 Loans and receivables Cash bank and in hand 87,460 87,460 66,415 66,415 Trade and other receivables 258, , , , , , , ,125 Financial liabilities at amortised cost Past due greater than one year 424, , , , , , , ,473 Interest paid on financial liabilities are shown in note 6. Prepayments and accrued income are excluded from the trade and other receivables balances. Accruals and deferred income and statutory liabilities are excluded from trade and other payables as these are not financial instruments. Borrowing facilities At 31 March 2016, the wider Keystone JVco Limited Group had committed borrowing facilities totalling 75.0m (FY15: 75.0m) representing revolving credit facilities and overdraft which expires on 31 March At 31 March 2016 the Group had drawn performance bonds under the facility totalling 10.7m (FY15: 19.9m), and therefore had undrawn facilities available to the wider Keystone JVco Limited Group totalling 64.3m (FY15: 55.1m). Revolving credit facilities bear interest at up to 3.75% over LIBOR whilst cash overdrafts are 4.5% over Bank of England base rate. Performance bonds attract interest at a flat rate of 3.75%. Financial assets and liabilities measured at fair value Level Fair value Level Fair value Available for sale assets Shared equity receivables n/a ,500 Specific valuation techniques used to value financial instruments are defined as: Fair value hierarchy Level 1 Quoted market prices or dealer quotes in active markets for similar instruments. Level 2 Fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 Fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

71 Keepmoat.com Related party disclosures Keepmoat Limited is part of the Keystone JVco Limited Group and the directors regard all subsidiaries, joint ventures and associates of the Keystone JVco Limited Group to be related parties. During the year the Group has traded with these related parties and summaries of those transactions are set out below: Trading transactions Sales to Purchases from Management fees/recharges Finance income/(expense) Year ended 31 March 2016 Joint ventures SOAR Build Limited 1, Durham Villages Regeneration Limited Associates Sheffield Housing Company Limited (SHC) 10, Investments Sustainable Communities for Leeds (Holdings) Limited Total 12, Year ended 31 March 2015 Joint ventures SOAR Build Limited Durham Villages Regeneration Limited Associates Sheffield Housing Company Limited (SHC) 11, New Tyne West Development Company LLP 6, Investments Sustainable Communities for Leeds (Holdings) Limited Total 19,

72 5.0 Consolidated Financial Statements Keepmoat.com Related party disclosures (continued) The outstanding balances between the Group and these related parties as at 31 March 2016 was as detailed below: Balances outstanding Trade and other receivables Trade and other payables As at 31 March Parent undertaking Keystone JVco Limited Keystone Topco Limited Keystone Bidco Limited - - 6,824 7,318 Lakeside 1 Limited 9,845 6,407 1, K & A Merger Limited - 5,365 2,012 2,003 Castle 1 Limited 78,972 81, ,537 14,609 Joint ventures 89,124 92, ,527 24,782 SOAR Build Limited Durham Villages Regeneration Limited BK Scotswood LLP 1,835 1, Associates Sheffield Housing Company Limited 1,478 2, New Tyne West Development Company LLP Investments Sustainable Communities for Leeds (Holdings) Limited 1,744 1, Total 6,039 6, Current 2,460 2, Non-current 3,579 3, Total 6,039 6, With the exception of the balances below, all amounts are current, unsecured, non-interest bearing and settled in cash. There are no provisions for impairment in respect of amounts owed by related parties. Included within trade and other receivables are the following non-current loans; Loan receivable from Sheffield Housing Company Limited ( SHC ) of 605,000 (FY15: 778,000) bearing interest at 7% and is secured on the assets of SHC Loan receivable from Sustainable Communities for Leeds (Holdings) Limited of 1,744,000 (FY15: 1,268,000) bearing interest at 11.75% and is unsecured Loan receivable from BK Scotswood LLP of 1,835,000 (FY15: 1,835,000) which bears no interest and is secured on the assets of the joint venture. Sustainable Communities for Leeds (Holdings) Limited ( SC4L ) Keepmoat Leeds PFI Limited has subscribed for a fixed rate, subordinated, unsecured loan note from SC4L, a company in which Keepmoat Leeds PFI Limited holds a 10% interest. The loan note is redeemable in 2032 and will accrue interest at a fixed rate of 11.75%.

73 Keepmoat.com Related party disclosures (continued) Principal subsidiary undertakings of the Group The following information relates to the principal subsidiary undertakings of the Group. All companies are incorporated in England and Wales. In the opinion of the directors, these companies are those whose results or financial position principally affect the results of the Group. Directly owned subsidiaries are denoted with an *. Name of Company Principal activities Group s effective shareholding Keepmoat Homes Limited * Private house building development 100% Keepmoat Regeneration Limited Housing regeneration 100% Keepmoat Regeneration (Bramall) Limited Housing regeneration 100% Keepmoat Regeneration (FHM) Limited Housing regeneration 100% Keepmoat Regeneration (Apollo) Limited Housing regeneration 100% Keepmoat Property Services Limited Maintenance, improvement, refurbishment and management of homes 100% Keepmoat in Partnership Limited Housing regeneration 100% Keepmoat Property Limited * Keepmoat Leeds (PFI) Limited * Property development and the holding of property on behalf of other Group companies Responsible for the Group s 10% minority interest in Sustainable Communities for Leeds (Holdings) Limited 100% 100% KGP (SHC) Limited * Intermediate holding company 90% Dormant and other subsidiaries Keepmoat Site Services Limited * Provision of corporate services 100% Keepmoat Regeneration (Holdings) Limited * Intermediate holding company 100% Force Solutions Limited * Dormant 100% Conquest Bidco Limited * Intermediate holding company 100% Apollo Support Services Group Limited Intermediate holding company 100% Apollo Holdco Limited Intermediate holding company 100% Toucan Holdings Limited Property management 100% FWA West Limited Specialist building contractors 100% Goldhall Electrical Limited Housing regeneration 100% Own Space Limited Dormant 100% Apollo Maintain Limited Dormant 100% Apollo Education Limited Dormant 100% Apollo Housing Limited Dormant 100% Apollo Response Limited Dormant 100% Warmer Home Finance Limited Dormant 100% Evolve Built for Life Limited * Dormant 55%

74 5.0 Consolidated Financial Statements Keepmoat.com Ultimate controlling party The directors regard Castle 1 Limited, a company registered in England and Wales, as the Company s immediate parent company and Keystone JVco Limited, a company registered in England and Wales, as the Company s ultimate UK based parent company. Keystone JVco Limited is the owner of the largest group in which these results are consolidated whilst Keystone Midco Limited is the owner of the smallest group in which these results are consolidated. The Company s ultimate parent company is Cotton Holding S.à.r.l., a company incorporated in Luxembourg, whilst the Company s ultimate controlling party is TDR Capital LLP through investment funds under their management. The consolidated financial statements of Keystone JVco Limited and Keystone Midco Limited may be obtained from Keepmoat Limited, The Waterfront, Lakeside Boulevard, Doncaster, DN4 5PL. 27 Post balance sheet event On 23 June 2016 the UK electorate voted to leave the European Union. This decision commences a process that is likely to take a minimum of two years to complete, and during this time the UK remains a member of the European Union. There will be a resulting period of uncertainty for the UK economy with increased volatility expected in financial markets. The impact of this volatility on the carrying value of land and build work in progress and the order book of the Regeneration business is currently unknown. This does not impact the fair value of assets and liabilities, including investment property, reported at the balance sheet date of 31 March First time adoption of IFRS The Group has adopted IFRS effective for its annual financial statements beginning 1 April This note explains how the transition has affected the Group s reported equity as at 1 April 2014, its profit and loss and other comprehensive income for the financial year ended 31 March 2015 and its balance sheet as at 31 March IFRS 1, First time adoption of international financial reporting standards, requires a first time adopter to apply all IFRS s effective as at the end of its first annual reporting period (31 March 2016 for the Group). IFRS 1 also provides a first time adopter certain optional exemptions and requires certain mandatory exemptions from full retrospective application. Most of these exemptions, if elected or mandatory, must be applied as at the beginning of the required comparative period (the transition date). The Group s transition date is 1 April The Company s ultimate UK parent company, Keystone JVco Limited reported under FRS 101 and the Keystone JVco Limited Group reported under IFRS in its first annual report on 31 March Adjustments (a) IAS 38 Intangible assets Computer software IAS 38 requires that computer software costs meeting the requirements of the standard are classified as intangible assets whereas UK GAAP typically permitted these costs to be included within tangible assets. Consequently, computer software has been reclassified from property, plant and equipment into intangible assets. Depreciation charged to the income statement has been reclassified as amortisation. There is no impact on reported equity as a result of the change. (b) IAS 28 Investments in joint ventures and associates Under IAS 28 the equity accounting method recognition of losses relating to joint ventures and associates restrict the carrying amount of the investments is reduced to zero. This has resulted in a 518,000 gain in assets and a corresponding increase in equity. (c) IFRS 3 Business combinations Goodwill amortisation Under IFRS 3 Goodwill is not amortised but is tested annually for impairment. Goodwill amortisation has been adjusted since the date of adoption of IFRS which has resulted in an increase in intangible assets of 7,435,000 and a corresponding increase in retained earnings.

75 Keepmoat.com First time adoption of IFRS (continued) (d) IAS 19 Employee Benefits Retirement benefit schemes IAS 19 amended the way interest income on plan assets is calculated. The total return on plan assets remains unchanged, however the interest income is recognised in profit and loss rather than other comprehensive income. The difference between the interest income and the total return on plan assets is included in other comprehensive income as part of the restatement of the plan s assets or liabilities. The Group has transferred 154,000 of income from other comprehensive income to profit and loss. (e) IAS 19 Employee Benefits Holiday pay Under IAS 19, holiday pay has been accrued over the period to which it relates and the following adjustments represent the aggregate value of the accrual less the value of any holidays taken. For the Group this has resulted in an increase in trade payables and a reduction in retained earnings of 2,400,000 at 31 March 2015 (1 April 2014: 2,300,000). (f) IAS 2 Inventories Land Creditor In accordance with IAS 2 Inventories, the Group has restated the land creditor to amortised cost. This has resulted in the following changes: A decrease in the value of the land creditors of 1,374,000 (1 April 2014: 1,334,000) for the company as at 31 March A reduction in the cost of sales of 906,000 and an increase in interest payable and similar expense of 946,000 in the year ending 31 March 2015 for the company due to the discounting of additional land creditors acquired during the year and to the unwinding of the discount. (g) IAS 12 Income taxes It is a requirement under IAS 12, that deferred tax assets and liabilities are recognised on the adjustments made on transition to IFRS. The recognition of deferred tax may be permanent or temporary timing differences. As a result in the opening financial position deferred tax assets increased by 764,000. At 31 March 2015 income tax is reduced by 965,000 made up of the deferred tax on the following adjustments: land creditor 8,000; shared equity loan 906,000; holiday pay accrual 20,000 and retirement benefit scheme adjustment 31,000. The closing financial position sees deferred tax assets increase by 1,661,000 made up of the deferred tax assets on the following transitional adjustments: land creditor 275,000; shared equity loan 906,000; holiday pay accrual 480,000. The closing deferred tax liability of 212,000 comes as a result of the adjustment to the retirement benefit scheme. (h) IAS 40 Revaluation of Investment property IAS 40 requires a gain arising from the change in the fair value of investment property shall be recognised in profit or losses in the period in which it arises. This has resulted in an increase in retained earnings of 24,000 and a corresponding decrease in other reserves. (i) IAS 39 Fair value of shared equity debtor In accordance with IAS 39 Financial instruments the Group has restated the shared equity debtor to its fair value. This resulted in a decrease in receivables falling due in more than one year of 4,528,000 and a corresponding increase in exceptional administrative expenses. (j) Reserves Revaluation and other reserves created under old UK GAAP have been transferred to retained earnings on transition as they relate to revaluation gains that have been subsequently reversed. The other reserve was a capital reserve relating to a historic acquisition. Cash Flow statement The cash flow statement for the year ended 31 March 2015 has been represented in view of the above adjustments. The effect was an 8,374,0000 increase in operating profit offset by a 6,987,000 decrease in amortisation of intangible assets: a 448,000 decrease in depreciation and a 939,000 decrease in working capital cash flows.

76 5.0 Consolidated Financial Statements Keepmoat.com First time adoption of IFRS (continued) Effect of IFRS adoption on the consolidated balance sheet as at 1 April 2014, the date of adoption Previous GAAP Effect of transition to IFRS Opening IFRS balance sheet Notes Goodwill 121, ,703 Intangible assets a Property, plant and equipment a 9,856 (593) 9,263 Investments in joint ventures and associates b (259) Shared equity loan receivables 26,235-26,235 Trade and other receivables 10,136-10,136 Deferred tax asset g 3, ,446 Retirement benefit asset d 1, ,253 Total non-current assets 172,355 1, ,702 Inventories f 123,977 (3,952) 120,025 Trade and other receivables 222, ,662 Cash and cash equivalents 58,950-58,950 Total current assets 405,589 (3,952) 401,637 Total assets 577,944 (2,605) 575,339 Equity Share capital Share premium account 50,000-50,000 Retained earnings b,d,f,g 190,792 (2,207) 188,585 Other reserves j 771 (368) 403 Equity attributable to owners of the Company 241,876 (2,575) 239,301 Non-controlling interests (611) - (611) Total equity 241,265 (2,575) 238,690 Liabilities Trade and other payables f 17,557 (2,618) 14,939 Retirement benefit liability d 1, ,443 Deferred tax liability Provisions for liabilities 1,547-1,547 Non-current liabilities 20,259 (2,330) 17,929 Trade and other payables e 312,373 2, ,673 Income tax payable 3,200-3,200 Provisions for liabilities Current liabilities 316,420 2, ,720 Total liabilities 336,679 (30) 336,649 Total equity and liabilities 577,944 (2,605) 575,339

77 Keepmoat.com First time adoption of IFRS (continued) Effect of IFRS adoption on the consolidated balance sheet as at 31 March 2015, the end of the last period presented Previous GAAP Effect of transition to IFRS IFRS Notes Goodwill c 114,268 7, ,703 Intangible assets a Property, plant and equipment a 8,107 (867) 7,240 Investment property Investments in joint ventures and associates b (480) Shared equity loan receivables i 27,028 (4,528) 22,500 Trade and other receivables 13,115-13,115 Deferred tax asset 1,705-1,705 Retirement benefit asset d ,126 Total non-current assets 165,244 3, ,894 Inventories f 149,413 (1,374) 148,039 Trade and other receivables 283, ,762 Deferred tax asset g - 1,661 1,661 Income tax recoverable 2,136-2,136 Cash and cash equivalents 66,415-66,415 Total current assets 501, ,013 Total assets 666,970 3, ,907 Equity Share capital Share premium account 50,000-50,000 Retained earnings b,d,f,g,h 230,144 1, ,848 Other reserves h 795 (392) 403 Total equity 281,252 1, ,564 Liabilities Trade and other payables 18,637-18,637 Retirement benefit liability d Deferred tax liability g Provisions for liabilities 2,317 (1,859) 458 Non-current liabilities 21,005 (1,634) 19,371 Trade and other payables e 364,713 2, ,113 Provisions for liabilities - 1,859 1,859 Current liabilities 364,713 4, ,972 Total liabilities 385,718 2, ,343 Total equity and liabilities 666,970 3, ,907

78 5.0 Consolidated Financial Statements Keepmoat.com First time adoption of IFRS (continued) Reconciliation of equity At 1 April 2014 At 31 March 2015 Notes Total equity under previous GAAP 241, ,252 Goodwill no longer amortised from date of transition c - 7,435 Recognition of employee benefits holiday pay e (2,300) (2,400) Derecognition of share of equity accounted losses below zero b Land purchased on deferred settlement terms f (1,334) (1,374) Fair value of shared equity debtor i - (4,528) (3,302) (349) Tax effect of the above g 727 1,661 Total adjustment to equity (2,575) 1,312 Total Equity under IFRS 238, ,564 Effect of IFRS adoption on the consolidated income statement for the year ended 31 March 2015, the last period presented Previous GAAP Effect of transition to IFRS IFRS Notes Group revenue 1,094,938-1,094,938 Cost of sales f (971,515) 906 (970,609) Gross profit 123, ,329 Administrative expenses c,e,h (71,664) 2,831 (68,833) Other operating income Share of results of equity accounted joint ventures and associates Operating profit before exceptional items and amortisation of intangibles b (71) ,065 1,387 59,452 Exceptional items 1,381 (4,528) (3,147) Amortisation of intangibles c (7,435) 6,987 (448) Operating profit 52,011 3,846 55,857 Loss on disposal of interest in joint venture (30) - (30) Finance income 2,131 (77) 2,054 Finance expense f (23) (946) (969) Profit before tax 54,089 2,823 56,912 Income tax charge g (13,820) 965 (12,855) Profit for the year 40,269 3,788 44,057

79 Keepmoat.com First time adoption of IFRS (continued) Effect of IFRS adoption on consolidated other comprehensive income statement for the year ended 31 March 2015, the last period presented Previous GAAP Effect of transition to IFRS IFRS Notes Profit for the year 40,269 3,788 44,057 Other comprehensive expense: Items that will not be subsequently reclassified to profit or loss Actuarial loss arising on retirement d (1,145) 154 (991) benefit obligations Deferred tax on retirement benefit obligation g 228 (31) 197 Revaluation of property h 24 (24) - Other comprehensive expense (893) 99 (794) for the year Total comprehensive income for the year 39,376 3,887 43,263

80 6.0 Independent Auditors Report Company Keepmoat.com 78 Independent auditors report to the members of Keepmoat Limited Company Report on the company financial statements Our opinion In our opinion, Keepmoat Limited s company financial statements (the financial statements ): give a true and fair view of the state of the company s affairs as at 31 March 2016; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act What we have audited The financial statements, included within the Annual Report and Financial Statements (the Annual Report ), comprise: the company balance sheet as at 31 March 2016; the company statement of changes in equity for the year then ended; the accounting policies; and the notes to the financial statements, which include other explanatory information. The financial reporting framework that has been applied in the preparation of the financial statements is United Kingdom Accounting Standards, comprising FRS 101 Reduced Disclosure Framework, and applicable law (United Kingdom Generally Accepted Accounting Practice). In applying the financial reporting framework, the directors have made a number of subjective judgements, for example in respect of significant accounting estimates. In making such estimates, they have made assumptions and considered future events. Opinion on other matter prescribed by the Companies Act 2006 In our opinion, the information given in the Strategic Report and the Directors Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Other matters on which we are required to report by exception Adequacy of accounting records and information and explanations received Under the Companies Act 2006 we are required to report to you if, in our opinion: we have not received all the information and explanations we require for our audit; or adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or the financial statements are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. Directors remuneration Under the Companies Act 2006 we are required to report to you if, in our opinion, certain disclosures of directors remuneration specified by law are not made. We have no exceptions to report arising from this responsibility.

81 Keepmoat.com 79 Responsibilities for the financial statements and the audit Our responsibilities and those of the directors As explained more fully in the Statement of directors responsibilities set out on page 23, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) ( ISAs (UK & Ireland) ). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. This report, including the opinions, has been prepared for and only for the company s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. What an audit of financial statements involves We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. We primarily focus our work in these areas by assessing the directors judgements against available evidence, forming our own judgements, and evaluating the disclosures in the financial statements. We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Other matter We have reported separately on the group financial statements of Keepmoat Limited for the year ended 31 March Andy Ward Senior Statutory Auditor for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Sheffield 11 July 2016

82 7.0 Company Financial Statements Keepmoat.com 80 Company balance sheet as at 31 March Notes Fixed assets Intangible assets Property, plant and equipment 32 1,508 1,951 Investments in subsidiaries 33 2,877 2,877 Retirement benefit asset 40 1,329 1,126 6,681 6,598 Current assets Trade and other receivables: amounts due within one year , ,788 Trade and other receivables: amounts due after one year 34 1,920 1,903 Cash and cash equivalents - - Total current assets 232, ,691 Trade and other payables: amounts due within one year 35 (181,483) (168,005) Net current assets 51, ,686 Total assets less current liabilities 57, ,284 Provisions for liabilities 36 (441) (186) Deferred tax liability 37 - (225) Net assets 57, ,873 Capital and reserves Share capital Share premium account 50,000 50,000 Retained earnings 6,698 88,157 Merger reserve Capital redemption reserve Total shareholders funds 57, ,873 The financial statements on pages 80 to 93 of Keepmoat Limited, registered number , were approved by the Board of Directors on 11 July 2016 and were signed on its behalf by: J Thomson Chief Financial Officer and Deputy Chief Executive Officer

83 Keepmoat.com 81 Company statement of changes in equity for year ended 31 March 2016 Share capital Share premium account Retained earnings Merger reserve Capital redemption reserve Total equity At 1 April 2014 (as previously reported) Accounting adjustments on transition to FRS 101 Note ,000 93, , At 1 April ,000 94, ,006 Loss for the year - - (5,858) - - (5,858) Other comprehensive expense - - (275) - - (275) Total comprehensive expense for the year ended 31 March (6,133) - - (6,133) At 1 April ,000 88, ,873 Profit for the year , ,169 Other comprehensive income Total comprehensive income for the year ended 31 March 2016 Dividends for the year ended 31 March , , (127,685) - - (127,685) At 31 March ,000 6, ,414 The merger reserve relates to the premium that arose on the issue of ordinary shares in part consideration for the acquisition of a subsidiary company in the year ended 31 December The capital redemption reserve relates to historic company share repurchases.

84 7.0 Company Financial Statements Keepmoat.com 82 Principal Company accounting policies for the year ended 31 March 2016 Basis of preparation The Company financial statements of Keepmoat Limited have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework ( FRS 101 ) and in accordance with applicable accounting standards and under the historical cost convention except available for sale financial assets which have been measured at fair value. These are the Company s first financial statements presented in accordance with FRS 101 and consequently transition statements showing the impact of the change in accounting basis are presented in note 19. The financial statements are presented in pounds sterling. All financial information is rounded to the nearest thousand ( 000) except where otherwise indicated. The principal accounting policies applied in the preparation of these financial statements have been consistently applied to all the periods presented unless otherwise stated. FRS 101 requires that the statement of profit or loss and balance sheet are presented in the format requirements of the Companies Act 2006, rather than the requirements of International Accounting Standard (IAS) 1 Presentation of Financial Statements. A summary of the disclosure exemptions adopted for the year ended 31 March 2016 is presented below. Equivalent disclosures for financial instruments are included in the Keepmoat Limited Group consolidated financial statements allowing the exemptions to be applied. Area Disclosure exemption Cash flow statements Complete exemption from preparing a cash flow statement. (IAS 7) Financial instrument disclosures Exemption from the disclosure requirements of IFRS 7 (Financial Instruments) and related IFRS 13 disclosures. Exemption from the disclosures in respect of management s objectives, policies and processes for managing capital (IAS1.134 to 136). Related party disclosures Exemption for related party transactions entered into between two or more members of a group, provided that any subsidiary which is party to a transaction is wholly owned by such a member. Exemption from disclosure of key management personnel compensation. Comparative information Presentation of Financial Statements Exemption from comparative disclosure for movements on share capital, tangibles, intangibles and investment property Exemption from statement of compliance with IFRS, cash flow information and capital management policy. The Company has consistently and uniformly applied the accounting policies of the Group set out on pages 31 to 37 insofar as they are applicable to the Company s financial statements prepared in accordance with FRS 101 and subject to the disclosure exemptions above. Investments Investments in subsidiaries, joint ventures and associates are recorded in the Company s balance sheet at cost less any impairment. The directors review the investments for impairment when there are indicators of possible impairment.

85 Keepmoat.com 83 Principal Company accounting policies for the year ended 31 March 2016 (continued) Critical accounting estimates and assumptions The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the company s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions or estimates are significant to the financial statements are set out below. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed as follows: Retirement benefits In determining the valuation of defined benefit schemes assets and liabilities, a number of key assumptions have been made. The key assumptions which are given below, are largely dependant upon factors outside the control of the company: return on plan assets; inflation rate; life expectancy; discount rate; and salary and pension growth rates. The Company is exposed to risks through it s defined benefit schemes if actual experience differs to the assumption used and through volatility in the plan assets. Details of the assumptions used and associated sensitivities are included in note 40. Impairment of investments Determining whether investments are impaired requires an estimate of the future discounted cash flows of each investment. Discounted cash flows and assumptions (including discount rates, timing of cash flows and growth prospects) are inherently subjective and largely dependent on factors outside the control of the Company. Profit for the financial year The Company has elected to take the exemption under Section 408 of the Companies Act 2006 to not present the parent company income statement and statement of other comprehensive income. The Company recorded a profit of 46,169,000 (FY15: loss 5,858,000) during the year.

86 7.0 Company Financial Statements Keepmoat.com 84 Notes to the financial statements Company for the year ended 31 March Employees and directors Directors emoluments Aggregate emoluments 2,207 2,148 Company pension contributions to money purchase scheme ,287 2, Highest paid director Aggregate emoluments Company pension contributions to money purchase scheme Operating costs Operating costs for the year include the following: Auditor s remuneration Audit of the Company s annual report Total audit services Tax compliance services Tax advisory services Fees payable to the Company s auditor in respect of associated pension schemes - 7 Other non-audit assurance services - 59 Other non-audit services Total other services Total auditor s remuneration

87 Keepmoat.com Intangible assets Computer Software Total Cost At 1 April Additions Disposals - - At 31 March ,510 1,510 Accumulated amortisation At 1 April Charge for the year Disposals - - At 31 March Net book amount At 31 March At 31 March Property, plant and equipment Leasehold property Plant, equipment, fixtures and fittings Total Cost At 1 April ,819 2,841 Additions Disposals At 31 March ,374 3,398 Accumulated depreciation At 1 April Charge for the year ,000 Disposals At 31 March ,877 1,890 Net book amount At 31 March ,497 1,508 At 31 March ,932 1,951

88 7.0 Company Financial Statements Keepmoat.com Investments in subsidiaries Cost and net book value At 1 April 2015 and 31 March ,877 2,877 Full details of both the Company s directly and indirectly controlled subsidiaries are provided in note 29 to the consolidated financial statements. 34 Trade and other receivables Trade and other receivables: amounts falling due after one year Amounts due from related party undertakings (note 44) 1,835 1,835 Deferred tax ,920 1,903 Trade and other receivables: amounts falling due within one year: Trade receivables 15 2 Amounts due from Group undertakings 114, ,930 Amounts due from parent undertakings 89,124 74,902 Income tax recoverable 13,767 11,980 Other receivables 9,809 17,850 Prepayments and accrued income 3,825 4,086 Deferred tax , ,788

89 Keepmoat.com Trade and other payables Trade and other payables: amounts falling due within one year Bank loans and overdraft (secured) 13,796 16,333 Trade payables 1,422 2,670 Amounts due to parent undertakings 112,527 7,318 Amounts due from Group undertakings 50, ,022 Amounts due from related party undertakings (note 44) - - Other tax and social security Other payables Accruals and deferred income 3,260 4, , ,005 Bank loans and overdrafts are secured by a fixed charge over freehold land and buildings of Group companies and a floating charge over the assets of the Group and are subject to cross guarantees with other Group companies. 36 Provisions for liabilities Onerous Leases Other Total At 1 April (Credited)/charged to the income statement (106) Utilised during the year - (15) (15) At 31 March Current Non-current At 31 March Current Non-current At 31 March Onerous Leases The onerous lease provision relates to the Company s leased estate. The provision is calculated on a property by property basis and is calculated up to the next available break date or end of lease, whichever is the earlier. Other provisions Other provisions comprise legal fees in relation to claims. All provisions are stated at expected cost as the effects of discounting are deemed to be immaterial.

90 7.0 Company Financial Statements Keepmoat.com Deferred tax The following deferred liabilities were recognised by the company as at 31 March Pension scheme Total Deferred tax liability At 1 April (Charge)/credit to income statement (225) (225) At 31 March Share capital See note 19 to the consolidated financial statements for details. 39 Financial commitments At 31 March 2016, the Company has entered into non-cancellable contracts for the operational leasing of land and buildings and plant and machinery. The leases have various terms, escalation clauses and renewal rights. The minimum commitments for payments under these contracts are as follows: Deferred tax liability Within one year Later than one year and less than five years After five years - - Total financial commitment These relate to operational leasing of land and buildings and vehicles

91 Keepmoat.com Retirement benefit schemes Hybrid group pension scheme The Company operates a hybrid group pension scheme, the Keepmoat Limited Group Pension Plan, with assets held in independently administered funds. The Company is the sponsoring employer for the plan and as there is no contractual agreement or policy for recharging the net benefit cost for the plan as a whole to the Company s subsidiary undertakings, the net benefit cost is recognised in full in the Company s financial statements. See note 22 for full details and disclosures of the hybrid scheme and the net surplus of 1,329,000 (FY15: 1,126,000). Defined contribution schemes The pension cost charged to the income statement in respect of the defined contribution scheme during the year was 319,000 (FY15: 301,000 representing contributions payable in the year. Contributions due to the Keepmoat Group Pension Plan at the period end were nil (FY15: 41,000). 41 Contingent liabilities The Company has given guarantees in respect of the bank borrowings of other Group companies in addition to performance and other guarantees. At 31 March 2016 borrowings covered by the guarantees amounted to nil (FY15: nil) whilst performance and other guarantees provided under the revolving credit facility amounted to 10,682,000 (FY15: 19,888,000). The guarantees are in the form of a fixed charge over certain freehold land and buildings and floating charges over the assets of certain Group companies. The Company is party to the Keystone Midco Limited Group ( Midco Group ) senior facility agreement whereby the Midco Group has a revolving credit facility with a maximum facility of 75,000,000 and an overdraft facility of up to 20,000,000. At 31 March 2016 the Midco Group was in a net cash position (FY15: net cash position).

92 7.0 Company Financial Statements Keepmoat.com Related party disclosures Keepmoat Limited is part of the Keystone JVco Limited Group and the directors regard all subsidiaries, joint ventures and associates of the Keystone JVco Limited Group to be related parties. The outstanding balances between the Company and these related parties as at 31 March 2016 was as detailed below: Balance outstanding Debtors Creditors As at 31 March Parent undertaking Keystone Topco Limited Joint ventures SOAR Build Limited Durham Villages Regeneration Limited BK Scotswood LLP 1,835 1, Osmaston Regeneration Partnership LLP Associates Sheffield Housing Company Limited (SHC) New Tyne West Development Company LLP Investments Sustainable Communities for Leeds (Holdings) Limited Total 1,835 1, Current Non-current 1,835 1, Total 1,835 1, With the exception of the balances below, all amounts are current, unsecured, non-interest bearing and settled in cash. There are no provisions for impairment in respect of amounts owed by related parties. Included within debtors are the following non-current loans: Loan receivable from BK Scotswood LLP of 1,835,000 which bears no interest and is secured on the assets of the joint venture. 43 Ultimate controlling party See note 26 to the consolidated financial statements.

93 Keepmoat.com First time adoption of FRS 101 The Company has adopted FRS 101 effective for its annual financial statements beginning 1 April This note explains how the transition has affected the Company s reported equity as at 1 April 2014 and its balance sheet as at 31 March IFRS 1, First time adoption of international financial reporting standards, requires a first time adopter to apply all IFRS s effective as at the end of its first annual reporting period (31 March 2016 for the Group). IFRS 1 also provides a first time adopter certain optional exemptions and requires certain mandatory exemptions from full retrospective application. Most of these exemptions, if elected or mandatory, must be applied as at the beginning of the required comparative period (the transition date). The Company s transition date is 1 April The Company s ultimate UK parent company, Keystone JVco Limited reported under FRS 101 and the Keystone JVco Limited Group reported under IFRS in its first annual report on 31 March Notes to the adjustments (a) IAS 38 Intangible Assets IAS 38 requires that computer software costs meeting the requirements of the standard are classified as intangible assets whereas UK GAAP typically permitted these costs to be included within tangible assets. Consequently, computer software has been reclassified from property, plant and equipment into intangible assets. Depreciation charged to the income statement has been reclassified as amortisation. There is no impact on reported equity as a result of the change. (b) IAS 19 (Revised) Employee Benefits Retirement benefits IAS 19 stipulates that defined benefit plans that share risks between entities under common control, for example, a parent and its subsidiaries, are not multi-employer plans. In the absence of a formal agreement for charging the net benefit cost to individual Group entities, the net defined benefit cost must be recognised in the separate or individual financial statements of the group entity that is legally the sponsoring employer. Consequently, the Keepmoat Limited Group Pension Plan has been reflected on the Company balance sheet for the first time. At 1 April 2014, this resulted in the recognition of a pension asset of 1,253,000 and a related deferred tax liability of 251,000 and a net increase in equity of 1,002,000. At 31 March 2015, the pension asset was 1,126,000 whilst the deferred tax liability was 225,000. (c) IAS 19 (Revised) Employee Benefits Holiday pay IAS 19 (Revised) Employee Benefits stipulates that an entity shall recognise the expected cost of short term employee benefits in the form of accumulating paid absences ( holiday pay ). As a result, the opening balance sheet at 1 April 2014 has been adjusted to reflect a liability of 192,000 and a related deferred tax asset of 38,000. Equity has thereby been reduced by 154,000. There were no further changes to the required accrued amount at 31 March 2015 and consequently there was no further impact on equity as at 31 March 2015 or the income statement for the year ended 31 March (d) IAS 12 Income taxes It is a requirement under IAS 12, that deferred tax assets and liabilities are recognised on the adjustments made on transition to IFRS. The recognition of deferred tax may be permanent or temporary timing differences. As a result in the opening financial position deferred tax liability increased by 251,000. The closing financial position sees deferred tax liabilities increase by 225,000.

94 7.0 Company Financial Statements Keepmoat.com First time adoption of FRS 101 (continued) Effect of FRS 101 adoption on the Company balance sheet as at 1 April 2014, the date of adoption Previous GAAP Effect of transition to FRS 101 Opening FRS 101 balance sheet Notes Fixed assets Intangible assets a Property, plant and equipment a 1,046 (165) 881 Investments in subsidiaries 2,877-2,877 Investments in joint ventures and associates Retirement benefit asset b - 1,253 1,253 3,923 1,253 5,176 Current assets Trade and other receivables: amounts falling due within one year Trade and other receivables: amounts falling due after one year c 282, ,683 3,741-3,741 Total current assets 286, ,424 Trade and other payables: amounts due within one year c (145,861) (192) (146,053) Net current assets 140,525 (154) 140,371 Total assets less current liabilities 144,448 1, ,547 Provisions for liabilities (290) - (290) Deferred tax liability d - (251) (251) Net assets 144, ,006 Capital and reserves Share capital Share premium account 50,000-50,000 Retained earnings 93, ,290 Merger reserve Capital redemption reserve Total shareholders funds 144, ,006

95 Keepmoat.com First time adoption of FRS 101 (continued) Effect of FRS 101 adoption on the Company balance sheet as at 31 March 2015, the end of the last period presented Previous GAAP Effect of transition to FRS 101 FRS 101 Notes Fixed assets Intangible assets a Property, plant and equipment a 2,595 (644) 1,951 Investments in subsidiaries 2,877-2,877 Investments in joint ventures and associates Retirement benefit asset b - 1,126 1,126 5,472 1,126 6,598 Current assets Trade and other receivables: amounts falling c 298, ,788 due within one year Trade and other receivables: amounts falling c 1,903-1,903 due after one year Total current assets 300, ,691 Trade and other payables: amounts c (167,813) (192) (168,005) due within one year Net current assets 132,840 (154) 132,686 Total assets less current liabilities 138, ,284 Provisions for liabilities (186) - (186) Deferred tax liability d - (225) (225) Net assets 138, ,873 Capital and reserves Share capital Share premium account 50,000-50,000 Retained earnings 87, ,157 Merger reserve Capital redemption reserve Total shareholders funds 138, ,873 At 1 April 2014 At 31 March 2015 Notes Total equity under previous GAAP 144, ,126 Recognition of hybrid defined benefit pension plan b 1,253 1,126 Recognition of employee benefits holiday pay c (192) (192) 1, Tax effect of the above d (213) (187) Total adjustment to equity Total Equity under IFRS 145, ,873

96 8.0 Directors and advisers Keepmoat.com 94 Directors and advisers Directors D A Sheridan J M D Thomson P Hindley Registered office The Waterfront Lakeside Boulevard Doncaster South Yorkshire DN4 5PL Registered number Independent auditors PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors St Paul s Place 121 Norfolk Street Sheffield S1 2LE Bankers Lloyds Bank plc City office PO Box 72 Bailey Drive Gillingham Business Park Kent ME8 0LS

97 Regeneration Project, Camden Hayes Place, Kent Southdown Heights, Eastbourne